How California's SB 822 will impact digital assets
California Senate Bill 822 (SB 822), signed into law by Governor Gavin Newsom in October 2025, makes California the primary U.S. state to guard unclaimed crypto assets from forced liquidation.
SB 822 treats digital assets similarly to bank accounts and securities, requiring that unclaimed cryptocurrencies be transferred of their original form and never immediately liquidated. This helps prevent forced liquidation of assets reminiscent of Bitcoin (BTC) or Ether (ETH), which could otherwise trigger taxable events for holders without their consent.
SB 822 reshaped the legal treatment of digital assets by subjecting them to California's Unclaimed Property Law, the primary state framework to obviously include crypto in the foundations for holding and transferring unclaimed property. Under this law, account holders may reclaim their original digital assets or, if those assets were sold, the online proceeds from the sale by filing a sound claim with the State Controller.
Authored by Senator Josh Becker, SB 822 updates California's decades-old unclaimed property law. It passed each houses in September 2025 before being signed by Gov. Gavin Newsom.
Did ? Self-custody wallets generally fall outside the scope of unclaimed property laws because there isn’t any third-party “owner.” However, that doesn't make them risk-free for users. Lost keys, forgotten seed phrases, or the death of an owner without an inheritance plan can lead to digital assets being permanently lost.
What is unclaimed property and why does crypto pose a challenge?
Unclaimed property or escheat refers to financial assets that remain dormant or abandoned by their rightful owners for a specified time period, typically three years. After this era, the state takes over the property. Conventionally, dormant bank accounts, uncashed checks or forgotten securities fell inside the scope of seizure.
Applying unclaimed property laws to cryptocurrencies has posed significant challenges for regulators. The decentralized nature of cryptocurrencies raises the query of whether or not they ought to be classified as money, property, or a singular asset class. Additionally, custodian banks and exchanges faced operational hurdles in transferring assets to the federal government without triggering taxable events for users.
Previous drafts of California's SB 822 reportedly required custodians to liquidate cryptocurrencies before transferring them. Such a move would have harmed user interests, made compliance harder, and weakened ownership principles for digital assets. Joe Ciccolo of the California Blockchain Advocacy Coalition, who previously submitted comments to the Department of Financial Protection and Innovation on digital asset regulation, said the ultimate version avoids these pitfalls and higher protects consumers.
Here's how California's SB 822 works
California's SB 822 provides a transparent structure for managing unclaimed cryptocurrencies under the state's unclaimed property law. This classifies digital financial assets as intangible assets which might be subject to the seizure rules.
The bill considers assets abandoned after three years without evidence of owner interest, reminiscent of account activity or communications. Game tokens, loyalty points and non-cryptocurrency digital content are excluded. Before assets are reported to the state, holders (exchanges or custodians) must notify owners six to 12 months upfront and supply detailed notice content and a form that enables users to reactivate accounts to reset the dormancy period.
Once unclaimed, holders must transfer the identical asset type and amount (without liquidation) to a government-appointed crypto custodian inside 30 days. The state controller may deny custody if it shouldn’t be within the state's interest. After about 18 to twenty months, the federal government can convert the holdings into fiat; Claimants can get well either the unique cryptocurrency (if it continues to be of their possession) or its proceeds. Owners or heirs may pursue claims through the state's unclaimed property procedures.
Did ? Claims are generally not subject to a statute of limitations once the holders have transferred the assets into the custody of the state. This means you or your heirs can reclaim long-lost cryptocurrencies years later. Documentation and proof of ownership are required to say.
How does SB 822 work in practice?
It is critical for account holders and custodians to know how digital assets are treated as unclaimed property in California. Here is a walkthrough of a dormant wallet scenario where a crypto holder is walked through the mandatory notification and transfer process to a government-appointed custodian.
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Dormant wallet scenario: Suppose Allan holds Bitcoin on a California-based exchange but doesn't log in or show any signs of interest for 3 years. The exchange must send him notice for six to 12 months before reporting the account as unclaimed. If he doesn't respond, the exchange reports ownership and transfers the cryptocurrency, unchanged and unliquidated, to a government-appointed custodian inside 30 days. When Allan returns later, he can petition the State Controller's Office to get well his original coins.
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Borderline cases and reservations: If a holder cannot contact the owner resulting from inactive contact details or a modified address, the asset continues to be considered unclaimed. If the owner files a lawsuit after the cryptocurrency is liquidated by the state, questions may arise in regards to the valuation date and possible capital gains implications under federal tax law.
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Exchange compliance: Platforms must maintain contact records and documentation of all owner communications. They also require secure transfer procedures and must use standardized owner reporting forms required by the state controller. Additionally, exchanges must coordinate with government-appointed crypto custodians to make sure compliance.
Implications of SB 822: Why it matters
California's SB 822 represents a major change in the best way digital assets are handled under state law. It has optimized operations and compliance for all stakeholders: users, holders, custodians, tax authorities and regulators.
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For crypto users and holders: SB 822 prevents the forced liquidation of unclaimed assets and allows owners to reclaim them while their cryptocurrencies remain in government custody. It also promotes a greater claims process, for instance by updating contact details.
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For stock exchanges and custodian banks: The law imposes significant compliance obligations, including record keeping, notifying owners, providing proof of notification, and transferring unliquidated cryptocurrencies to the state.
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For tax authorities and supervisory authorities: SB 822 can generate potential revenue when assets are sold after a waiting period. This makes California the primary state to ban the forced liquidation of unclaimed cryptocurrencies, setting a regulatory precedent that other states could adopt.
Did ? Staking rewards and airdrops can complicate unclaimed cryptocurrencies. Some jurisdictions expect holders or government custodians to keep up assets as-is, which can include rewards accruing during custody.
How California's SB 822 sets the usual for unclaimed cryptocurrencies
California's SB 822 is in keeping with broader efforts worldwide to integrate cryptocurrencies into existing property laws. Several US states reminiscent of Arizona and Texas have taken steps to incorporate digital assets in unclaimed property frameworks.
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Arizona: In May 2025, Arizona's HB 2749 placed “digital assets” and “virtual currency” under its unclaimed property law. It takes under consideration assets abandoned after three years of no ownership activity, with undeliverable electronic notices considered a relevant indicator of abandonment. Holders must report and deliver abandoned assets to the Arizona Department of Revenue of their original form. Unclaimed assets could also be liquidated by the state through established exchanges or other economically viable methods.
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Texas: SB 1244, effective September 1, 2025, also provides for a three-year dormancy period starting with a failed communication or activity by the last owner. If a holder has full control of the private keys, they have to report and deliver the virtual currency in its native form. However, if a holder is simply in partial possession of the private keys, they’re still required to report this but should not obliged to deliver the digital asset. The auditor may use qualified custodians and should not liquidate assets below the present market price.
California also uses a three-year dormancy period, but requires holders to transfer the unliquidated cryptocurrency to a state-appointed custodian. The law expressly prohibits compulsory liquidation upon transfer. While Arizona and Texas allow state liquidations, California is delaying the transition to fiat currencies, emphasizing consumer protection.
