In short
- California’s SB 822 explicitly includes digital financial assets under the state’s Unclaimed Property Law, treating them as bank accounts and securities.
- The bill preserves unclaimed digital assets in their original form, preventing forced liquidation that would have triggered taxable events for consumers without their consent.
- Account holders can reclaim their original digital assets, or the net proceeds if they have already been converted, after filing a valid claim with the state comptroller.
California Governor Gavin Newsom has signed legislation making him the first state to explicitly protect unclaimed crypto from foreclosure, ensuring digital assets remain in their original form and are not converted into cash before being transferred to state custody.
Senate Bill 822Written by Senator Josh Becker (D-Menlo Park), it updates California’s decades-old Unclaimed Property Law to include digital financial assets, treating Bitcoin, Ethereum and other cryptos with the same legal framework that applies to abandoned bank accounts and securities.
The bill was unanimously passed by both chambers in September signed by Newsom on Saturday.
The legislation clarifies that digital financial assets are a form of intangible property subject to the Unclaimed Property Law, addressing uncertainty about how California should handle dormant crypto accounts that remain untouched for three years after failed contact attempts or inactivity.
“Previous versions of the bill would have required exchanges, custodians and wallet providers to forcibly liquidate customers’ digital financial assets before turning them over to the State Controller’s Office – essentially creating a taxable event for consumers without their knowledge or consent,” Joe Ciccolo, executive director of the California Blockchain, told me Advocacy Coalition. Declutter.
“This approach would have introduced significant operational, compliance and legal challenges for the industry, while providing little real protection for consumers,” he added, as CBAC led advocacy efforts throughout the legislature.
Another ‘important step’
The legislation is “another important step toward modernizing California’s regulatory framework to reflect the reality of digital financial assets,” Ciccolo said.
The bill prescribes specific requirements for holders of digital financial assets to notify apparent owners before a seizure occurs.
Companies must notify owners six to 12 months before assets are reported, using a controller-approved form that allows them to restart the expiration period, the bill says.
SB 822 also specifies that holders of digital financial assets must transfer the exact asset type, private keys, and exact amount, unliquidated, to the administrator’s crypto custodian within 30 days of the final reporting date.
The bill authorizes the administrator to select one or more licensed custodians for the management and custody of digital assets in custody, where custodians must have valid licenses issued by the Ministry of Financial Protection and Innovation.
The controller can then convert unclaimed cryptocurrency to fiat 18 to 20 months after filing, with valid claimants receiving either their assets or the sale proceeds, the bill said.
“SB 822 provides long-awaited clarity by extending the existing UPL framework to digital financial assets, ensuring they are treated consistently and responsibly,” he said, noting that the group will remain engaged to ensure the law is applied “consistently, transparently and in line with consumer protection objectives.”
Last weekend, Newsom also signed Senate Bill 243, making California the first state to establish explicit guardrails for AI “companion” chatbots.
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