California’s New Legislation Safeguards Unclaimed Cryptocurrency
In a significant move, the Governor of California has enacted a new law incorporating cryptocurrency into the state’s Unclaimed Property Law (UPL). This legislation is designed to keep unclaimed digital assets intact, preventing their automatic liquidation or conversion into cash.
California’s Initiative to Secure Unclaimed Digital Assets
Governor Gavin Newsom has officially ratified Senate Bill 822 (SB822), amending the Code of Civil Procedure. This amendment recognizes cryptocurrencies as intangible assets under the unclaimed property law. The bill, championed by Senator Josh Becker, successfully navigated both legislative chambers in September before reaching the Governor.
This legislative action is part of California’s ongoing efforts to create a robust regulatory environment for digital currencies. Earlier in the year, Avelino Valencia, the chair of the Banking and Finance Committee, introduced Assembly Bill 1052 (AB1052), advocating for the protection of self-custody rights for California residents. The bill also aimed to acknowledge digital currencies as legitimate payment methods for private transactions and proposed similar safeguards for unclaimed digital assets to prevent them from languishing in bureaucratic delays.
Understanding the Unclaimed Property Law
The existing Unclaimed Property Law mandates that any intangible personal property without an active owner for over three years escheats to the state. By integrating cryptocurrencies into this framework, the state ensures that digital assets, if inactive for three years, will be claimed by the state unless communicated otherwise by the owner.
Could SB822 Serve as a Model for Nationwide Reform?
Senate Bill 822 establishes a structured approach for managing unclaimed cryptocurrencies dormant for three years on custodial platforms. According to the new law, these digital assets will be transferred to state custody in their original form, avoiding immediate liquidation. Holders of these assets are required to notify owners before the assets escheat to the state, and the State Controller is empowered to appoint custodians to manage these assets.
Furthermore, the law allows the State Controller to auction unclaimed digital assets 18-20 months post-reporting to the highest bidder. If sold, rightful claimants can retrieve the proceeds from these sales.
National Implications of California’s Legislation
Paul Grewal, Chief Legal Officer at Coinbase, commended Governor Newsom for enacting SB822, which prevents the involuntary liquidation of Californians’ unclaimed crypto investments. Grewal suggested that this law could set a precedent for a nationwide reform of unclaimed property laws.
However, Grewal also urged California to align with the majority of states and the SEC in safeguarding staking rights with platforms like Coinbase, emphasizing the need for continued legislative advancements.
Conclusion
California’s proactive approach to unclaimed digital assets sets a new standard for protecting cryptocurrency investments. As the state continues to refine its legal framework, these measures could inspire similar reforms across the United States, ensuring digital assets remain secure and accessible to their rightful owners.
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