New California Law Stops Forced Liquidation of Unclaimed Cryptocurrencies

2 mins mins

In Brief

California is the first U.S. state to protect unclaimed crypto from liquidation.
New law mandates in-kind crypto transfers to licensed state-approved custodians.
Owners must be notified 6–12 months before digital assets are reported as unclaimed.

California has enacted a new law that protects unclaimed cryptocurrency from being forcibly converted into cash by custodians. Governor Gavin Newsom signed Senate Bill 822, which passed unanimously in both state legislative chambers in September 2025. This move marks the first time any U.S. state has updated its unclaimed property law to include digital financial assets.

The law ensures that unclaimed crypto like Bitcoin and Ethereum stays in its original form instead of being sold off. It applies to digital wallets and exchange accounts that remain inactive for three years with no contact from the owner. The legislation also prevents automatic taxable events that would result from liquidation.

Joe Ciccolo, Executive Director of the California Blockchain Advocacy Coalition, stated the bill avoids legal and operational problems for both firms and consumers. He said, “This approach would have introduced significant compliance and tax burdens without offering real consumer protection.” The law aims to strike a balance between innovation and responsibility.

New Rules Require Notification and Safe Asset Transfer

Under SB 822, companies must notify asset owners six to twelve months before their crypto is reported as unclaimed. They must use a State Controller-approved form, which gives owners a chance to reset the escheatment period. This step increases transparency and gives users more time to reclaim their assets.

The law requires companies to transfer digital assets in-kind, including private keys, to licensed crypto custodians within 30 days of submitting their final report. These custodians must hold valid licenses from the Department of Financial Protection and Innovation. The Controller may liquidate the assets only after 18 to 20 months if no claim is made.

Ciccolo added, “SB 822 extends the state’s consumer protections into the digital era, ensuring consistent handling of modern financial property.” California has also created a tech task force involving Ripple and Coinbase to continue modernising state policy.

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