California has taken a pivotal step toward protecting the digital financial interests of its residents by enacting a groundbreaking law that addresses the treatment of unclaimed crypto assets. Governor Gavin Newsom recently signed Senate Bill 822 (SB 822), which amends the state’s Code of Civil Procedure to officially recognize cryptocurrencies as intangible property under California’s Unclaimed Property Law (UPL).
This legislation, introduced by Senator Josh Becker and passed by both legislative chambers in September, is designed to ensure that unclaimed crypto assets are not subject to automatic liquidation. Instead, these assets must now be preserved in their original digital form when transferred to the state, providing an essential safeguard for crypto investors and users whose assets may have become dormant.
Under the updated legal framework, any digital assets held in custodial accounts that remain inactive for three years could be considered unclaimed property. The escheatment process—whereby unclaimed property is transferred to the state—would now apply to cryptocurrencies only after specific conditions are met. These include the failure of written or electronic notifications to reach the owner or the absence of activity indicating the owner’s interest or control over the asset.
Crucially, SB 822 prevents the state from immediately converting these digital holdings into cash, a practice common with other types of unclaimed property. Instead, the law mandates that the assets remain in their crypto form during the initial holding period, ensuring that potential claimants can recover the actual digital assets rather than their equivalent cash value, which could fluctuate significantly due to market volatility.
Further provisions within the law require custodians of the unclaimed assets to notify the owners through reasonable means before initiating the escheatment process. Once the assets are officially transferred to the state, the California State Controller is authorized to appoint one or more custodians responsible for safekeeping the crypto holdings.
If the assets remain unclaimed, the Controller may then proceed with selling them through a public auction to the highest bidder. However, this sale cannot occur until 18–20 months after the final date for submitting the necessary reports, giving owners ample time to reclaim their property. If the assets are sold, rightful claimants are entitled to receive the proceeds from these sales.
The push to include digital assets under the UPL aligns with California’s broader initiative to establish a comprehensive regulatory framework for cryptocurrencies. Earlier this year, Assembly Bill 1052 (AB 1052), introduced by Assemblymember Avelino Valencia, sought to secure self-custody rights for individuals and formally recognize digital currencies as legal forms of payment in private transactions. Though that bill is currently held in legislative suspense, it echoes similar goals to SB 822—particularly in affirming the rights of Californians to control and recover their crypto assets.
Paul Grewal, Chief Legal Officer of Coinbase, commended the new legislation, praising Governor Newsom for ensuring that Californians’ digital assets will not be liquidated without their consent. Grewal also emphasized that SB 822 could serve as a model for federal reform, potentially influencing national standards on how unclaimed crypto property is managed across the United States.
Despite these advancements, Grewal also called on California to join the 46 other states and the U.S. Securities and Exchange Commission (SEC) in legally recognizing crypto staking as a protected activity. This indicates that while the state has made significant progress, broader crypto rights and regulatory clarity are still needed.
The growing importance of crypto asset management at the state level reflects the increasing participation of individuals and institutions in the digital economy. As more Americans adopt cryptocurrencies for investment, payment, and savings, the legal infrastructure must evolve to address unique challenges posed by digital ownership—especially in cases where assets become dormant or accounts are abandoned.
One key issue that SB 822 addresses is the risk of asset loss due to bureaucratic inefficiencies. Traditional financial accounts with unclaimed funds often get cashed out by state authorities after a period of inactivity, sometimes without the knowledge of the owner. For crypto holders, automatic liquidation could result in substantial financial loss, particularly if the value of the asset appreciates after conversion. By preserving the original form of the digital asset, the new law helps protect investors from missing out on future gains.
Moreover, the law’s approach to transparency and due process is notable. By requiring custodians to contact owners before escheatment and by delaying any sale of the assets for nearly two years, the legislation promotes fairness and accountability. It also recognizes the complexity of digital assets, which may be stored across multiple platforms, wallets, or even offline systems, making owner identification more difficult than with traditional financial instruments.
As states across the country grapple with how to regulate and incorporate digital assets into existing legal frameworks, California’s SB 822 stands out not only for its comprehensiveness but also for its forward-thinking stance on individual property rights in the digital age.
Looking ahead, this law could catalyze similar reforms in other states. Lawmakers nationwide are increasingly aware of the need to adapt old statutes to modern technology, and the inclusion of cryptocurrencies under unclaimed property laws is likely to become a standard practice.
For crypto users, this law sends a clear message: your digital assets matter, and the state of California is taking steps to ensure they remain protected—even when forgotten. But it also underscores the importance of staying engaged with your holdings—regularly accessing accounts, updating contact information, and designating beneficiaries when possible—to avoid the risk of escheatment.
In the broader context of digital finance, SB 822 represents a significant milestone. It not only safeguards unclaimed assets but also legitimizes cryptocurrencies as a class of property deserving of the same legal protections as more traditional assets. As innovation in the crypto space continues, such legal recognition will be essential for fostering trust, stability, and fairness in the evolving financial landscape.