California enacts law protecting unclaimed cryptocurrencies by preventing forced liquidation

By Hannah Perez

SB 822 amends California’s Unclaimed Property Law to include digital assets. This means that now the state can claim those assets in their original form, without needing to exchange them for cash.

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• SB 822 amends California’s Unclaimed Property Law to include digital assets.
• It means that when now the state can claim those assets in their original form.
• Before the change, the state was required to liquidate forgotten cryptocurrencies for dollars.
• Paul Grewal, Coinbase’s chief legal officer, welcomed the law’s enactment.

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California Governor Gavin Newsom has signed new legislation mandating that unclaimed cryptocurrencies be transferred to state custody in their original form, preventing their immediate forced liquidation.

Senate Bill 822 (SB 822), approved by California legislators and signed by Newsom on October 11, introduces a modification to key sections of the state’s Unclaimed Property Law to explicitly include digital financial assets, such as cryptocurrencies, according to the outlet. The Block.

According to the official text of the law, financial digital assets – defined as those based on Blockchainas Bitcoin either Ethereum– are now considered intangible property subject to the rules of transfer to the state.

Law prevents forced liquidation of forgotten cryptos

This regulation means that cryptocurrency custody platforms, such as exchanges centralized, must notify owners when their balances have remained inactive for 3 years. Notifications must be made 6 to 12 months before transfer to state custody in its original form, without forced liquidation or cash conversion.

According to the language of the regulations, The California State Controller will be responsible for receiving unclaimed cryptocurrencies within 30 days, including the private keys necessary for their management.

The Controller may designate one or more licensed custodians to securely store these assets, considering criteria such as storage security, regulatory compliance, and processes to reunify owners with their assets. However, if a valid claim is not filed within 18 to 20 months of reporting, the state has the option to convert the assets to fiat currency at the prevailing market price.

California modernizes its property and finance laws

For the state government, this law represents a modernization of its property and financial legal frameworks, adapting them to the digital age.

By allowing custody of cryptocurrencies in their original form, California avoids risks associated with market volatility during the initial storage period, but also positions itself to potentially benefit from the appreciation of these assets if they are unclaimed. Additionally, the designation of specialized custodians ensures compliance with federal regulations, strengthening the state’s infrastructure to handle cryptocurrencies without drastically altering existing rules for other unclaimed property.

Benefits for crypto investors in California

For cryptocurrency investors residing in the state, SB 822 offers greater protection against unnecessary losses. Previously, lack of clarity in the law could lead to forced liquidation of dormant assets, exposing them to unfavorable price fluctuations. Now, owners have the opportunity to reclaim their cryptocurrencies in their original form if they act before the state’s optional conversion, preserving the potential value of their investments.

This reduces uncertainty for dormant account holders and facilitates the reunification process, aligning with practices in other states and promoting greater trust in the Californian crypto ecosystem.

Paul Grewal, legal director of Coinbasehighlighted the new law as a positive step in the state, celebrating its enactment.

“Thank you [al gobernador Newsom] for signing SB 822, which stops the liquidation of Californians’ unclaimed cryptocurrency investments without their consent”Grewal wrote in X, urging California to join the other 46 US states that protect the right to perform staking through platforms such as Coinbase.

This reform comes at a time of growing cryptocurrency adoption in California, a technology hub that is home to leading companies in BlockchainAI and other emerging technologies. This same week, Governor Newsom signed a pioneering law in the US that imposes protections on the use of AI chatbots for minors.

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Article written with an AI tool, edited by DailyBitcoin

Image from Unsplash

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