California’s Governor recently approved a law to include crypto assets in the state’s Unclaimed Property Law (UPL) to preserve unclaimed digital assets in their original form and prevent automatic liquidation or cash conversions.
California To Protect Unclaimed Crypto Assets
California Governor Gavin Newsom signed Senate Bill 822 (SB822) into law on Saturday to update the Code of Civil Procedure to clarify that crypto assets are intangible property that are subject to the unclaimed property law.
The bill, sponsored by Senator Josh Becker, passed both chambers in September and was sent to the Governor’s desk by the end of the month, according to California’s legislative information website.
This move follows California lawmakers’ previous efforts to develop a comprehensive framework for crypto assets. In February, California’s Banking and Finance Committee chairman, Avelino Valencia, introduced Assembly Bill 1052 (AB1052) to secure self-custody rights for the state’s residents.
As reported by Bitcoinist, the bill included provisions to explicitly recognize digital assets as a “valid and legal” payment method in private transactions for goods and services. Additionally, it established a similar framework to SB822 for handling unclaimed digital assets, aiming to prevent crypto funds from being lost in “bureaucratic limbo.”
Unclaimed Property Law provides that all intangible personal property of an apparent owner “escheats to the state if, for more than 3 years after it becomes payable or distributable, the apparent owner has not taken specified actions showing an interest in or control of the property.”
Therefore, updating the UPL to include crypto assets would provide that “intangible property held in a digital asset account escheats to the state 3 years after either written or electronic communication to the owner is returned undelivered, or the date of the last exercise of ownership interest, as defined by the owner.”
Nonetheless, AB1052 was placed on the suspense file on August 18, California’s legislative information website shows.
The ‘Blueprint’ For A National UPL Reform?
Notably, SB822 establishes a framework for handling unclaimed crypto assets that have been inactive for three years on custodial platforms. Under the new rules, unclaimed digital assets must be transferred to state custody in their original form, preventing immediate forced liquidations or cash conversion.
It also prescribes requirements for holders of the unclaimed crypto assets to notify apparent owners prior to the assets escheating, and it authorizes the State Controller to select one or more custodians for the management and safekeeping of unclaimed digital assets that have escheated to the state.
Additionally, the bill allows the Controller to sell the unclaimed crypto assets 18-20 months after the report filing to the highest bidder, enabling valid claimants to receive the sale proceeds if the assets have already been sold.
All escheated property delivered to the Controller under this chapter shall be sold by the Controller to the highest bidder at public sale in whatever city in the state affords in the Controller’s judgment the most favorable market for the property involved, (…). However, no sale shall be made pursuant to this subdivision until 18 months after the final date for filing the report required by Section 1530.
Coinbase’s Chief Legal Officer (CLO), Paul Grewal, thanked Governor Newsom for signing SB822 into law and preventing the state from liquidating Californians’ unclaimed crypto investments without their consent. He also highlighted a review of the law that suggests that the bill could become the “blueprint for national unclaimed property law” in the US.
Nonetheless, Grewal urged the state authority to “join the 46 other states, along with SEC that protect the right to stake with Coinbase and others,” hinting that legislative efforts must continue.
