Brief
- California’s SB 822 explicitly includes digital financial assets under the state’s unclaimed property law, treating them like bank accounts and securities.
- The bill preserves unclaimed digital assets in their native form, preventing forced liquidation that would have created taxable events for consumers without their consent.
- Account holders can recover their original digital assets, or net proceeds if they have already been converted, after filing a valid claim with the State Comptroller.
California Governor Gavin Newsom signed a law making him the first state to explicitly protect unclaimed cryptocurrencies from forced liquidation, ensuring that digital assets remain in their original form rather than being converted to cash before being transferred to state custody.
Senate Bill 822authored by Sen. Josh Becker (D-Menlo Park), 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 governs bank accounts and abandoned securities.
The bill was unanimously passed by both houses in September before being signed by Newsom SATURDAY.
The legislation clarifies that digital financial assets are a form of intangible property subject to the Unclaimed Property Act, addressing uncertainty over how California should handle dormant crypto accounts, those that remain intact for three years after failed contact attempts or inactivity.
“Earlier versions of the bill would have required exchanges, custodians and wallet providers to forcibly liquidate customers’ digital financial assets before transferring them to the state comptroller’s office, creating a taxable event for consumers without their knowledge or consent,” said Joe Ciccolo, executive director of the California Blockchain Advocacy Coalition. Decrypt.
“This approach would have introduced significant operational, compliance and legal challenges for the industry, while providing little real protection for consumers,” he added, as CCCB led advocacy efforts throughout the legislative session.
Another “milestone”
The legislation is “another important step toward modernizing California’s regulatory framework to reflect the realities of digital financial assets,” Ciccolo said.
The bill imposes specific requirements on holders of digital financial assets to notify apparent owners prior to escheatment.
Businesses must notify owners six to 12 months before declaring assets, using a comptroller-approved form that allows them to restart the escheat period, according to the bill.
SB 822 also clarifies that holders of digital financial assets must transfer the exact asset type, private keys and amount, unliquidated, to the controller’s crypto custodian within 30 days of the final reporting date.
The Bill authorizes the Controller to select one or more licensed custodians for the management and custody of deposited digital assets, with custodians required to hold valid licenses issued by the Ministry of Financial Protection and Innovation.
The comptroller can then convert the unclaimed crypto to fiat 18 to 20 months after deposit, with valid claimants receiving either their assets or the proceeds of the sale, the bill states.
“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 the group will remain committed to ensuring the law is applied “consistently, transparently, and consistent with its consumer protection goals.”
Over the weekend, Newsom also signed Senate Bill 243, making California the first state to establish explicit guardrails for AI “companion” chatbots.
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