California Enacts Landmark Cryptocurrency Legislation
In a landmark decision, California has become the pioneering state to enact legislation that safeguards unclaimed cryptocurrencies from being forcibly liquidated. Governor Gavin Newsom officially approved this transformative measure, which ensures that digital assets such as Bitcoin and Ethereum are maintained in their original form when transitioning to state custody, rather than being converted to cash.
Senate Bill 822 Overview
This legislation, known as Senate Bill 822 and introduced by Senator Josh Becker (D-Menlo Park), updates the state’s Unclaimed Property Law for the first time in decades to recognize and regulate digital financial assets alongside traditional assets like abandoned bank accounts and securities.
The bill, which garnered unanimous support in both legislative chambers before its signing on Saturday, aims to address lingering uncertainties by designating dormant crypto accounts—those inactive for over three years—as entitled to protections similar to traditional property rights.
Joe Ciccolo, the Executive Director of the California Blockchain Advocacy Coalition, remarked on earlier versions of the bill which would have required the liquidation of digital assets before their transfer to the State Controller’s Office. Such approaches would have unnecessarily taxed consumers without their consent and presented numerous challenges for the industry.
Key Provisions of the New Law
The newly enacted law represents a vital modernization of California’s regulatory approach to digital assets, according to Ciccolo. It imposes strict obligations on holders of these digital assets to notify apparent owners ahead of the escheatment process. Companies must reach out to asset owners six to twelve months prior to reporting unclaimed assets, allowing individuals the opportunity to reactivate their claims.
Furthermore, SB 822 mandates that any digital financial assets transferred to the state’s custody must remain unliquidated, with holders required to transfer the precise type of asset, as well as its private keys and amount, to the Controller within 30 days of the final reporting date. To manage these assets effectively, the bill empowers the Controller to designate licensed custodians for safekeeping duties.
After 18 to 20 months, unclaimed digital assets may then be converted to fiat currency, with rightful claimants entitled to receive either the original assets or the proceeds from their sale.
Impact and Future Commitments
Ciccolo highlighted that this new law brings much-needed clarity to the regulatory framework, promoting responsible handling of digital financial assets. He emphasized the coalition’s ongoing commitment to ensure the implementation of these regulations aligns with consumer protection principles.
In addition to this significant legislation, Governor Newsom also approved Senate Bill 243, establishing California as the first state to create explicit regulations for AI companion chatbots.
