TL;DR
- Governor Gavin Newsom signed SB 822 into law, the first of its kind in the United States.
- The law requires the state to hold unclaimed cryptocurrencies “in-kind,” not to liquidate them for cash.
- Investors will now have better conditions and more time to recover their original digital assets.
California positions itself at the forefront of digital asset regulation in the United States. Governor Gavin Newsom has signed bill SB 822 into law.
This pioneering legislation reforms the state’s Unclaimed Property Law and establishes a new standard for the protection of crypto assets in California, addressing a critical issue that affected thousands of investors: the forced liquidation of their funds.
Until now, if an account on an exchange or with a custodian remained inactive for three years, the company was required to turn the assets over to the state, which would then proceed with their immediate liquidation for fiat money.
This meant that if an owner later claimed their funds, they only received the cash value at the time of the sale, losing any future appreciation and facing potential tax implications. The new law eliminates this practice by default.
Prioritizing the Owner’s Rights
With SB 822, California is required to maintain digital financial assets “in-kind.” Instead of selling them, the state will appoint licensed cryptocurrency custodians to manage them.
Assets will not be considered abandoned until after a three-year period of inactivity, and companies must send notifications to the owners 6 to 12 months before reporting them to the state. If the assets finally pass into state custody, the original owner will have a minimum of 18 months to claim their original cryptocurrencies.
This measure not only offers greater protection for crypto assets in California but also aligns the treatment of cryptocurrencies with that of other financial securities, such as stocks and bank accounts. The law, which excludes self-custody wallets, sets a precedent that could influence legislation in other states, prioritizing the recovery of the owner’s assets over administrative simplicity.
