Unclaimed Crypto Won’t Be Sold in California Under New Law Approved by State Governor

California Becomes First State to Protect Unclaimed Crypto From Forced Liquidation

California has moved to formally safeguard dormant cryptocurrencies, ensuring that digital assets such as Bitcoin and Ethereum remain intact rather than being automatically converted to cash when transferred to state custody.

Governor Gavin Newsom signed Senate Bill 822 into law on Saturday, marking the first time a US state has extended its Unclaimed Property Law (UPL) to include digital financial assets.

How SB 822 Updates Unclaimed Property Rules?

Authored by Senator Josh Becker (D-Menlo Park), SB 822 classifies digital financial assets as intangible property under California law, resolving long-standing uncertainty over how dormant crypto accounts should be handled.

The legislation applies to accounts left untouched for three years after failed contact attempts or inactivity.

Digital asset custodians are now required to notify apparent owners six to twelve months before reporting assets as unclaimed, using a standard form approved by the Controller’s Office.

SB 822 has emerged as the blueprint for revamping state unclaimed property laws, influencing similar reform discussions among California's legislature.

This gives owners an opportunity to reclaim or reactivate their holdings before state intervention.

Once an account is reported as unclaimed, custodians must transfer the exact type and amount of assets, along with relevant private keys, to a state-approved custodian within 30 days.

These custodians, licensed by the Department of Financial Protection and Innovation, are responsible for securely managing the assets in compliance with state standards.

The State Controller may later convert unclaimed crypto to fiat after 18 to 20 months, with rightful owners entitled to recover either the original assets or the sale proceeds.

Industry Reaction Highlights Importance

The move has drawn praise from key figures in the crypto sector.

Paul Grewal, chief legal officer at Coinbase, tweeted:

"Thank you [Gavin Newsom] for signing SB 822, which stops the state from liquidating Californians' unclaimed crypto investments without their consent. Now it's time for California to join the 46 other states, along with [SEC] that protect the right to stake with [Coinbase] and others."

Observers note that the legislation modernises California’s regulatory framework, aligning it with the realities of digital financial assets.

By extending existing UPL mechanisms to cryptocurrencies, the state addresses uncertainty that previously left custodians and exchanges unsure of reporting obligations.

Who Will Manage Dormant Crypto Accounts?

SB 822 authorises the Controller to appoint one or more licensed custodians to manage unclaimed crypto assets.

These custodians are tasked with holding assets securely and ensuring compliance with state regulations.

By stipulating that only licensed custodians can handle unclaimed digital assets, the law introduces a formal and accountable structure for managing dormant cryptocurrencies.

Broader Trends in State-Level Crypto Regulation

California’s move comes amid broader US trends where states are exploring the role of digital assets in public finance.

Last month, Michigan lawmakers revived House Bill 4087, allowing the state to allocate up to 10% of funds to Bitcoin and other cryptocurrencies.

Texas, New Hampshire, and Arizona have also taken steps to integrate crypto as a strategic reserve asset.

Could This Redefine Dormant Crypto Management Across the US?

Coinlive sees SB 822 as a test case for how governments can handle dormant digital assets responsibly.

While it ensures protections for owners, it also exposes potential challenges in implementing a secure, scalable custodial system.

Will this approach set a nationwide standard, or highlight gaps in state-level readiness to manage crypto at scale?

The law prompts a crucial debate on whether traditional property frameworks can fully accommodate the unique risks and technical complexities of digital currencies.