California Becomes First State to Protect Unclaimed Crypto from Forced Liquidation

California has become the first US state to formally protect unclaimed cryptocurrencies from being forcibly converted to cash, marking a milestone in how governments handle dormant digital assets.

Key Takeaways:

• California’s new law protects unclaimed crypto from forced liquidation, keeping assets in their original form under state custody.
• Senate Bill 822 expands the state’s Unclaimed Property Law to cover digital assets like Bitcoin and Ethereum.
• Custodians must notify owners before reporting assets as unclaimed and transfer the exact crypto type.

Governor Gavin Newsom signed Senate Bill 822 into law over the weekend, ensuring that Bitcoin, Ethereum, and other crypto assets remain in their original form when transferred to state custody under the state’s Unclaimed Property Law (UPL).

The bill, authored by Senator Josh Becker (D-Menlo Park), passed both chambers unanimously in September before receiving the governor’s approval on Saturday.

California Expands Unclaimed Property Law to Cover Dormant Crypto Assets

The law updates California’s decades-old UPL, which governs how the state handles dormant financial assets such as abandoned bank accounts, securities, and insurance proceeds.

Under the new provisions, digital financial assets are now officially classified as intangible property subject to the same framework, addressing a long-standing legal gap over how to treat inactive crypto holdings.

The change applies to accounts that remain untouched for at least three years following failed contact attempts.

Previously, ambiguity around digital assets had left custodians and exchanges uncertain about their responsibilities and reporting procedures.

Under SB 822, digital asset custodians are required to notify apparent owners between six and twelve months before assets are reported as unclaimed.

Notifications must follow a standardized form approved by the Controller’s Office, allowing users to reclaim or reactivate their holdings before state intervention.

Once the escheatment process begins, holders must transfer the exact type and amount of the asset, along with the relevant private keys, to a state-approved custodian within 30 days.

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

The Controller may later convert unclaimed crypto to fiat after 18 to 20 months, with rightful owners still entitled to reclaim their assets or equivalent sale proceeds.

Alongside SB 822, Governor Newsom also signed Senate Bill 243, which establishes the nation’s first legal guardrails for AI “companion” chatbots.

Michigan Lawmakers Advance Bitcoin Bill

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

The move positions Michigan alongside a growing list of states eyeing Bitcoin as a hedge and strategic reserve asset, joining early movers like Texas, New Hampshire, and Arizona.

International momentum is building as well. The Philippines recently introduced a bill to establish a strategic Bitcoin reserve with a 20-year lockup period.

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

Pakistan has also taken a major policy turn 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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