In a landmark move for digital asset regulation, Governor Gavin Newsom has signed Senate Bill 822 (SB 822) into law, making California the first U.S. state to explicitly protect unclaimed cryptocurrencies from being forcibly liquidated before transfer to state custody.
Authored by Senator Josh Becker (D-Menlo Park), the new legislation updates California’s Unclaimed Property Law (UPL) to recognize digital financial assets, including Bitcoin, Ethereum, and other cryptocurrencies, as a form of intangible property. This means that unclaimed crypto will remain in its original form rather than being converted into cash when it escheats to the state.
The bill passed both chambers unanimously in September and was officially signed by Governor Newsom on Saturday.
California’s SB 822 protects unclaimed crypto
— BNN (@brainsnewsnets) October 14, 2025
The law ensures unclaimed cryptocurrencies stay in their original form. Dormant accounts can be managed by licensed custodians, and conversion to cash is allowed only after 18–20 months if unclaimed. pic.twitter.com/ErEaFtHXm7
What SB 822 changes
Under the new law, businesses such as crypto exchanges and custodians must treat unclaimed digital assets the same way they would handle abandoned bank accounts or securities. If an account remains dormant for three years, after failed attempts to contact the owner, the assets may be transferred to the State Controller’s Office, but only in their original crypto form.
Previously, earlier drafts of the bill required exchanges and wallet providers to sell unclaimed crypto holdings before transferring the proceeds to the state, potentially creating taxable events without the owner’s consent. That version was revised after strong opposition from industry advocates.
“Earlier versions of the bill would have required forced liquidation of customers’ digital assets, creating compliance and legal challenges while doing little to protect consumers,” said Joe Ciccolo, Executive Director of the California Blockchain Advocacy Coalition (CBAC), which led advocacy efforts on the bill. “SB 822 is an important step toward modernizing California’s regulatory framework to reflect the realities of digital financial assets.”
New requirements for exchanges and custodians
SB 822 sets notification requirements for companies holding digital assets.
- Notice period: Holders must notify apparent owners 6 to 12 months before reporting unclaimed crypto.
- Notification form: A state-approved form allows owners to confirm contact or restart the escheatment period.
- Custody standards: Digital assets must be transferred unliquidated, including exact token type, amount, and associated private keys, to a licensed crypto custodian designated by the Controller.
Once under the Controller’s custody, the state may choose to convert the assets into fiat currency 18 to 20 months after filing. If an owner later files a valid claim, they are entitled to either their original crypto asset or the net proceeds from any sale.
Industry and consumer impact
Supporters say the law balances consumer protection with operational clarity for the blockchain industry. It ensures crypto investors are not forced into unintended taxable events and keeps the assets safeguarded under a consistent legal framework.
“This legislation offers long-awaited clarity and ensures unclaimed digital assets are handled responsibly,” Ciccolo added, emphasizing CBAC’s commitment to ongoing engagement as the law is implemented.
Modernizing California’s digital asset rules
Senator Becker described the bill as a necessary modernization of California’s long-standing property laws to include the realities of digital finance. With SB 822, California joins a growing number of jurisdictions clarifying how unclaimed crypto should be managed, but becomes the first to prohibit forced liquidation outright.
The law’s passage highlights California’s intent to remain a leader in responsible innovation, balancing investor protection with the evolving digital economy.
Over the same weekend, Governor Newsom also signed Senate Bill 243, which sets the nation’s first guidelines for AI “companion” chatbots, signaling California’s continued effort to shape emerging technology policy.
Gunel Ismayilova
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