How California’s SB 822 will affect digital property
California’s Senate Invoice 822 (SB 822), signed into regulation by Governor Gavin Newsom in October 2025, makes California the primary US state to guard unclaimed crypto property from compelled liquidation.
Treating digital property equally to financial institution accounts and securities, SB 822 requires unclaimed cryptocurrencies to be transferred of their native kind somewhat than instantly liquidated. This helps stop compelled liquidation of property like Bitcoin (BTC) or Ether (ETH), which might in any other case trigger taxable events for holders with out their consent.
SB 822 has reshaped the authorized therapy of digital property by bringing them beneath California’s Unclaimed Property Legislation, the primary state framework to obviously embrace crypto in guidelines round holding and transferring unclaimed property. Below this regulation, account holders can reclaim their authentic digital property or, if these property have been offered, the online proceeds from the sale by submitting a sound declare to the State Controller.
Authored by Senator Josh Becker, SB 822 updates California’s decades-old Unclaimed Property Legislation. It handed via each homes in September 2025 earlier than being signed by Governor Gavin Newsom.
Do you know? Self-custodied wallets are usually outdoors the scope of unclaimed-property legal guidelines as a result of no third-party “holder” exists. Nevertheless, that doesn’t make them risk-free for customers. Misplaced keys, forgotten seed phrases or the loss of life of an proprietor with out an inheritance plan can completely strand digital property.
What’s unclaimed property, and why does crypto pose a problem?
Unclaimed property, or escheatment, refers to monetary property that stay inactive or deserted by their rightful homeowners for a set interval, sometimes three years. After this era, the state takes over the property. Conventionally, dormant financial institution accounts, uncashed checks or forgotten securities got here beneath the purview of escheatment.
Making use of unclaimed-property legal guidelines to cryptocurrency posed important challenges for regulators. The decentralized nature of crypto raised questions on whether or not it must be categorized as money, property or a novel asset class. As well as, custodians and exchanges confronted operational hurdles in transferring property to the state with out triggering taxable occasions for customers.
Earlier drafts of California’s SB 822 reportedly required custodians to liquidate crypto earlier than remittance. Such a transfer would have harm person pursuits, difficult compliance and weakened digital-asset possession rules. Joe Ciccolo of the California Blockchain Advocacy Coalition, who beforehand submitted feedback to the Division of Monetary Safety and Innovation on digital-asset regulation, stated that the ultimate model averted these pitfalls and higher protected customers.
How California’s SB 822 operates
California’s SB 822 gives a transparent construction for managing unclaimed cryptocurrency beneath the state’s Unclaimed Property Legislation. It classifies digital monetary property as intangible property topic to escheatment guidelines.
The invoice considers property deserted after three years with none indication of proprietor curiosity, akin to account exercise or communication. It excludes recreation tokens, loyalty factors and non-crypto digital content material. Earlier than reporting property to the state, holders (exchanges or custodians) should notify homeowners six to 12 months upfront, offering detailed discover content material and a kind permitting customers to reactivate accounts to reset the dormancy interval.
As soon as unclaimed, holders should switch the identical asset sort and quantity (with out liquidation) inside 30 days to a state-appointed crypto custodian. The State Controller could decline custody if it’s not within the state’s curiosity. After about 18-20 months, the state could convert holdings to fiat; claimants can recuperate both the unique crypto (if nonetheless held) or its proceeds. Homeowners or heirs could file claims beneath the state’s unclaimed property declare procedures.
Do you know? Claims sometimes haven’t any statute of limitations as soon as holders switch the property to the state’s custody. Meaning you or your heirs can reclaim long-lost crypto years later. The declare requires paperwork and proof of possession.
How does SB 822 function in apply?
Understanding how digital property are handled as unclaimed property in California is essential for account holders and custodians. Here’s a walkthrough of a dormant wallet state of affairs, following a crypto holder via the necessary notification and switch course of to a state-appointed custodian.
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Dormant pockets state of affairs: Suppose Allan holds Bitcoin on a California-based alternate however doesn’t log in or present any indication of curiosity for 3 years. The alternate should ship him a discover six to 12 months earlier than reporting the account as unclaimed. If he doesn’t reply, the alternate stories the holding and transfers the crypto, unchanged and unliquidated, inside 30 days to a state-appointed custodian. If Allan returns later, he can file a declare with the State Controller’s Workplace to recuperate his authentic cash.
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Edge circumstances and caveats: If a holder can not attain the proprietor due to inactive contact particulars or a modified tackle, the asset nonetheless qualifies as unclaimed. If the proprietor recordsdata a declare after the crypto has been liquidated by the state, there could also be questions in regards to the valuation date and potential capital features implications beneath federal tax regulation.
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Trade compliance: Platforms should preserve contact data and documentation of all proprietor communications. In addition they want safe switch procedures and should use standardized owner-notification types prescribed by the State Controller. As well as, exchanges are required to coordinate with state-appointed crypto custodians to make sure compliance.
Implications of SB 822: Why it issues
California’s SB 822 represents a big change in how digital property are dealt with beneath state regulation. It has streamlined operations and compliance for all stakeholders: customers, holders, custodians, tax authorities and regulators.
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For crypto customers and holders: SB 822 prevents compelled liquidation of unclaimed property and permits homeowners to reclaim whereas their crypto is held in state custody. It additionally promotes a greater claiming course of, akin to retaining contact particulars up to date.
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For exchanges and custodians: The regulation imposes important compliance obligations, together with record-keeping, proprietor notifications, proof of discover and the switch of unliquidated crypto to the state.
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For tax authorities and regulators: SB 822 could generate potential income if property are offered after a ready interval. It makes California the primary state to ban compelled liquidation of unclaimed crypto, establishing a regulatory precedent different states could undertake.
Do you know? Staking rewards and airdrops can complicate unclaimed crypto. Some jurisdictions count on holders or state custodians to protect property as they’re, which can embrace rewards accruing throughout custody.
How California’s SB 822 is setting the usual for unclaimed crypto
California’s SB 822 aligns with broader efforts globally to combine cryptocurrency into current property legal guidelines. A number of US states, akin to Arizona and Texas, have taken steps to incorporate digital property in unclaimed-property frameworks.
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Arizona: In Might 2025, Arizona’s HB 2749 positioned “digital property” and “digital forex” beneath its unclaimed property regulation. It considers property deserted after three years with none proprietor exercise, with undeliverable digital notices handled as a related indicator of abandonment. Holders have to report and ship deserted property to the Arizona Division of Income of their authentic kind. Unclaimed property could also be liquidated by the state via established exchanges or different commercially affordable strategies.
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Texas: SB 1244, efficient on Sept. 1, 2025, additionally applies a three-year dormancy interval, ranging from a failed communication or final proprietor exercise. If a holder has full management of the non-public keys, they have to report and ship the digital forex in its native kind. Nevertheless, if a holder solely partially holds the private keys, they have to nonetheless report however usually are not required to ship the digital asset. The comptroller could use certified custodians and liquidate property not under the present market value.
California additionally makes use of a three-year dormancy interval however requires holders to switch the unliquidated crypto to a state-appointed custodian. The regulation explicitly prohibits compelled liquidation at switch. Whereas Arizona and Texas allow state liquidation, California delays any conversion to fiat, prioritizing client safety.
