In a landmark move, California’s Senate Bill 822 has officially integrated digital financial assets into the state’s Unclaimed Property Law, equating them with traditional bank accounts and securities. This legislation ensures that unclaimed digital assets are retained in their original form, thus averting involuntary liquidation that could lead to taxable situations for consumers without their awareness. Individuals will have the ability to reclaim either their digital assets or the net proceeds if these assets have already been converted, as long as they submit a valid claim to the State Controller.
### California Becomes the First State to Safeguard Unclaimed Crypto
California Governor Gavin Newsom has made history by signing a bill that uniquely safeguards unclaimed cryptocurrencies from forced liquidation, allowing these digital assets to remain intact rather than being converted to cash before being placed under state control. Authored by Senator Josh Becker, the bill modernizes California’s long-standing Unclaimed Property Law by explicitly including digital financial assets such as Bitcoin and Ethereum, thereby applying the same legal standards that govern abandoned bank accounts and securities. The bill received unanimous approval from both legislative chambers in September prior to its signing.
### Clarity on Handling Dormant Crypto Accounts
The new law clarifies that digital financial assets are categorized as intangible property, thereby providing guidance on how dormant cryptocurrency accounts—those inactive for three years following unsuccessful contact attempts—should be managed. Joe Ciccolo, Executive Director of the California Blockchain Advocacy Coalition, pointed out that earlier proposals would have compelled exchanges, custodians, and wallet providers to liquidate clients’ digital assets before transferring them to the State Controller’s Office. This would have unintentionally triggered taxable events for consumers without their consent, leading to operational and legal obstacles for the industry while offering minimal real protection for users.
### A Step Towards Regulatory Modernization
Ciccolo remarked that this legislation represents a significant advancement in updating California’s regulatory framework to align with the growing importance of digital financial assets. The bill introduces specific obligations for holders of these assets, mandating that they inform apparent owners prior to the escheatment process. Companies are required to notify asset owners between six to twelve months before reporting the assets using a Controller-approved format that allows owners to restart the escheatment timeline.
### Requirements for Asset Transfer to the Controller
SB 822 stipulates that holders must transfer the exact type of digital asset, including private keys and amounts, to the Controller’s crypto custodian within 30 days following the final reporting date, without any liquidation. The Controller has the authority to appoint one or more licensed custodians for the secure management of these escrowed digital assets, with custodians needing to hold valid licenses from the Department of Financial Protection and Innovation. After 18 to 20 months of filing, the Controller can convert unclaimed cryptocurrencies into fiat currency, ensuring that valid claimants receive either their original assets or the proceeds from their sale.
### Ensuring Responsible Management of Digital Assets
Ciccolo emphasized that SB 822 provides much-needed clarity by extending the existing Unclaimed Property Law framework to encompass digital financial assets, ensuring they are managed in a consistent and responsible manner. He noted that the coalition will continue to engage with regulators to guarantee the law is implemented transparently and in accordance with its consumer-protection objectives. Additionally, Governor Newsom recently enacted Senate Bill 243, establishing California as the first state to create explicit regulations for AI “companion” chatbots.
