California Becomes the First State to Safeguard Unclaimed Cryptocurrency from Mandatory Liquidation

California has emerged as the first state in the United States to officially safeguard unclaimed cryptocurrencies from being forcibly converted into cash, representing a significant development in the management of dormant digital assets by governments.

Key Takeaways:

• The new legislation in California shields unclaimed cryptocurrencies from compulsory liquidation, preserving assets in their original format while under state custody.
• Senate Bill 822 broadens the scope of the state’s Unclaimed Property Law to include digital assets such as Bitcoin and Ethereum.
• Custodians are required to inform owners prior to designating assets as unclaimed and must transfer the specific type of cryptocurrency.

Governor Gavin Newsom enacted Senate Bill 822 into law over the weekend, ensuring that Bitcoin, Ethereum, and other digital assets retain their original form when they are transferred to state custody in accordance with the state’s Unclaimed Property Law (UPL).

The bill, introduced by Senator Josh Becker (D-Menlo Park), received unanimous approval from both legislative chambers in September before being signed by the governor on Saturday.

California Expands Unclaimed Property Law to Include Dormant Crypto Assets

This legislation revises California’s long-standing UPL, which regulates the management of dormant financial assets such as abandoned bank accounts, securities, and insurance payouts.

With the new regulations, digital financial assets are now officially recognized as intangible property, subject to the same legal framework, thereby addressing a persistent legal ambiguity regarding inactive cryptocurrency holdings.

The new provisions apply to accounts that have not been accessed for a minimum of three years following unsuccessful attempts to contact the owners.

Previously, the lack of clarity surrounding digital assets had left custodians and exchanges uncertain about their obligations and reporting practices.

Under SB 822, custodians of digital assets must notify apparent owners between six and twelve months prior to reporting assets as unclaimed.

Notifications must adhere to a standardized format approved by the Controller’s Office, enabling users to reclaim or reactivate their assets before state action is taken.

California just passed a bill to seize #Bitcoin left idle on exchanges.
After 3 years of inactivity, assets can be taken by the state under ‘Unclaimed Property’ laws.
Bill now heads to the Senate. pic.twitter.com/nl1pQPWkvW

— TFTC (@TFTC21) June 4, 2025

Once the escheatment process is initiated, holders are required to transfer the exact type and quantity of the asset, along with the corresponding private keys, to a state-approved custodian within 30 days.

These custodians must possess valid licenses issued by the Department of Financial Protection and Innovation.

The Controller may subsequently convert unclaimed cryptocurrencies to fiat currency after a period of 18 to 20 months, with rightful owners still having the right to reclaim their assets or the equivalent proceeds from the sale.

In addition to SB 822, Governor Newsom also signed Senate Bill 243, which establishes the first legal framework for AI “companion” chatbots in the nation.

Michigan Lawmakers Advance Bitcoin Bill

Last month, lawmakers in Michigan revived House Bill 4087, which would allow the state to allocate up to 10% of its funds to Bitcoin and other cryptocurrencies, potentially aligning with Texas, Arizona, and New Hampshire in their sovereign crypto initiatives.

This initiative positions Michigan alongside an increasing number of states considering Bitcoin as a hedge and strategic reserve asset, joining early adopters like Texas, New Hampshire, and Arizona.

Internationally, momentum is also building. The Philippines recently proposed a bill to create a strategic Bitcoin reserve with a 20-year lockup period.

Meanwhile, El Salvador, the first nation to recognize Bitcoin as legal tender, is reportedly adding gold to its national reserves.

Pakistan has also made a significant policy shift with its plans to establish a government-led Strategic Bitcoin Reserve, announced in May 2025 by Bilal Bin Saqib, head of the Pakistan Crypto Council.

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