The Impact of California’s SB 822 on Digital Assets
California Senate Bill 822 (SB 822), enacted by Governor Gavin Newsom in October 2025, positions California as the inaugural US state to safeguard unclaimed crypto assets from obligatory liquidation.
By equating digital assets to bank accounts and securities, SB 822 mandates that unclaimed cryptocurrencies be transferred in their original format rather than sold off immediately. This measure alleviates the risk of forced liquidation for assets like Bitcoin (BTC) or Ether (ETH), which could lead to taxable events for holders without their consent.
SB 822 has transformed the legal landscape for digital assets by incorporating them into California’s Unclaimed Property Law, being the first state statute to clearly recognize crypto in regulations pertaining to the holding and transferring of unclaimed property. Under this statute, account holders can reclaim their original digital assets or, in the event of a sale, the net proceeds by submitting a legitimate claim to the State Controller.
Senator Josh Becker authored SB 822, which modernizes California’s long-standing Unclaimed Property Law. It successfully passed both legislative houses in September 2025 prior to receiving the governor’s signature.
Did you know? Self-custodied wallets are typically excluded from unclaimed-property legislation given the absence of a third-party “holder.” Yet, they are not without risks for users, such as lost keys, forgotten seed phrases, or an owner’s death without an inheritance plan, which can permanently lock away digital assets.
What Constitutes Unclaimed Property, and Why Does Crypto Complicate Matters?
Unclaimed property, or escheatment, pertains to financial assets that have remained inactive or deserted by their rightful owners for a certain period, usually three years. Following this time frame, the state assumes control over the property. Traditionally, this includes dormant bank accounts, uncashed checks, or forgotten securities.
Implementing unclaimed-property laws for cryptocurrency posed considerable hurdles for regulators. The decentralized aspect of crypto led to debates on its classification as cash, property, or a distinct asset class. Moreover, custodians and exchanges contended with operational challenges in transferring assets to the state without incurring taxable events for users.
Initial drafts of California’s SB 822 reportedly obliged custodians to liquidate crypto prior to remittance. Such a requirement would have undermined user interests, complicated compliance, and weakened principles of digital-asset ownership. Joe Ciccolo from the California Blockchain Advocacy Coalition, who previously provided feedback to the Department of Financial Protection and Innovation on digital-asset regulations, remarked that the final iteration circumvented these pitfalls and offered better consumer protection.
How SB 822 Functions in California
California’s SB 822 delineates a clear framework for managing unclaimed cryptocurrency in alignment with the state’s Unclaimed Property Law. It categorizes digital financial assets as intangible property subject to escheatment standards.
The legislation considers assets abandoned after a three-year period without owner engagement, such as account activity or communication. Game tokens, loyalty points, and non-crypto digital content are excluded. Before announcing assets to the state, holders (exchanges or custodians) must provide a notification to owners six to twelve months in advance, including detailed content and a form enabling users to reactivate accounts to reset the dormancy timeframe.
Once deemed unclaimed, holders are required to transfer the identical asset type and amount (without liquidation) within 30 days to a state-designated crypto custodian. The State Controller can refuse custody if it does not align with the state’s interests. After approximately 18-20 months, the state may convert holdings to fiat; claimants can retrieve either the original crypto (if still held) or its sale proceeds. Owners or heirs can submit claims through the state’s unclaimed property claim process.
Did you know? Claims generally have no statute of limitations once holders move the assets into the state’s custody. This allows you or your heirs to reclaim long-lost crypto many years down the line. The claim process necessitates documentation and proof of ownership.
Practical Application of SB 822
Grasping the treatment of digital assets as unclaimed property in California is essential for both account holders and custodians. Below is a scenario detailing a dormant wallet and the consequent mandatory notification and transfer process to a state-appointed custodian.
Dormant wallet scenario: Consider Allan, who possesses Bitcoin on a California-based exchange but does not log in or show any signs of interest for three years. The exchange must send him a notification six to twelve months before designating the account as unclaimed. If he fails to respond, the exchange files the report and transfers the crypto, unchanged and without liquidation, within 30 days to a state-appointed custodian. If Allan returns afterward, he can submit a claim to the State Controller’s Office to retrieve his original coins.
Edge cases and considerations: If a holder cannot contact the owner due to inactive details or an altered address, the asset still meets the criteria for being unclaimed. If the owner submits a claim post-liquidation of the crypto by the state, there may arise issues regarding the valuation date and possible capital gains ramifications under federal tax regulations.
Exchange compliance: Platforms must maintain records of contact and all communications with owners. They are also required to implement secure transfer processes and utilize standardized owner-notification forms as mandated by the State Controller. Furthermore, exchanges must collaborate with state-designated crypto custodians to ensure compliance.
Significance of SB 822: Why It Matters
California’s SB 822 signifies a pivotal alteration in the management of digital assets under state legislation. It has refined operations and compliance for all involved parties: users, holders, custodians, tax authorities, and regulators.
For crypto users and holders: SB 822 averts forced liquidation of unclaimed assets and enables owners to reclaim their crypto while held in state custody. It also fosters a more efficient claiming procedure, promoting the importance of keeping contact information updated.
For exchanges and custodians: The law imposes substantial compliance requirements, which include record-keeping, owner notifications, proof of notice, and the transfer of unliquidated cryptocurrency to the state.
For tax authorities and regulators: SB 822 may generate potential revenue if assets are sold after the waiting period. It positions California as the first state to bar forced liquidation of unclaimed crypto, establishing a regulatory benchmark that other states may follow.
Did you know? Staking rewards and airdrops may complicate unclaimed crypto situations. Certain jurisdictions anticipate that holders or state custodians will retain assets as they are, which can include rewards accrued during custody.
How SB 822 Sets a Benchmark for Unclaimed Crypto
California’s SB 822 aligns with global initiatives to incorporate cryptocurrency into existing property laws. Numerous US states, including Arizona and Texas, have begun efforts to integrate digital assets into their unclaimed-property regulatory frameworks.
Arizona: In May 2025, Arizona’s HB 2749 included “digital assets” and “virtual currency” in its unclaimed property regulations. It considers assets abandoned after a three-year period without any owner interaction, treating undeliverable electronic notices as a relevant sign of abandonment. Holders are required to report and deliver abandoned assets to the Arizona Department of Revenue in their original format. The state may liquidate unclaimed assets through recognized exchanges or other commercially viable methods.
Texas: SB 1244, effective Sept. 1, 2025, implements a three-year dormancy timeframe based on failed communication or last owner activity. If a holder has complete control of the private keys, they must report and deliver the virtual currency in its original form. However, if a holder only partially possesses the private keys, they must still submit a report but are not obliged to deliver the digital asset. The comptroller may utilize qualified custodians and liquidate assets at no less than the current market price.
California also adheres to a three-year dormancy period but obligates holders to transfer unliquidated crypto to a state-attached custodian. The law explicitly disallows forced liquidation at the time of transfer. While Arizona and Texas permit state liquidation, California prioritizes consumer protection by delaying any conversion to fiat.
