The law preserves owners’ rights, sets notification steps and limits forced liquidation while clarifying custody duties.
California: what the unclaimed crypto law covers
Senate Bill 822 (SB 822) explicitly brings digital financial assets into California’s Unclaimed Property Law.
The measure defines when assets become abandoned, requires holders to follow reporting procedures and, importantly, aims to keep assets in their native form where feasible. For the full statutory language, see the SB 822 bill text.
How the crypto escheatment notification requirements work
SB 822 creates concrete crypto escheatment notification requirements. Holders must attempt to contact apparent owners using a Controller-approved notice form. Notices must be sent between six and 12 months before final reporting, and owners who respond can restart the escheatment period.
In short, the law gives owners a real chance to reclaim property before it moves to state custody.
Escheatment period owner notice: timing and forms
The law requires documented outreach and specific timing windows. Holders must send at least one attempt to notify owners in the six- to 12-month window and use the Controller’s approved template when provided.
Consequently, firms will need reliable contact records and audit trails to demonstrate compliance.
State controller crypto custodian and private-key transfers
SB 822 establishes the state controller crypto custodian role. The Controller may select one or more licensed custodians to accept unclaimed digital assets on behalf of the state. Under the statute, holders are required to transfer the exact asset type and the unliquidated amount; the law also contemplates a transfer private keys requirement to enable secure custody.
Transfers must occur within 30 days after the final reporting date.
Licensed crypto custodian requirement
Custodians designated by the Controller must hold valid licences or authorizations consistent with state oversight. Therefore, the law introduces a clear licensed crypto custodian requirement intended to protect assets while they are under state care. Firms should verify licensing before executing transfers.
Unclaimed crypto conversion rules and reclaiming assets
The Controller may convert unclaimed crypto to fiat only after a statutory waiting period. Specifically, conversions are permitted between 18 and 20 months after the filing date, and valid claimants may later receive either the original asset or the sale proceeds. These unclaimed crypto conversion rules aim to balance owner recovery rights with practical custody needs.
Claiming assets after escheatment
Owners can file a valid claim with the Controller to recover the original asset or, if already sold, the net proceeds. As a result, stakeholders should retain clear ownership records to speed any recovery.
Practical steps for exchanges, custodians and owners
From operational experience, firms should reconcile hot and cold wallets and keep complete contact and KYC records. In addition, document all owner-notice attempts and retain proof of delivery for Controller inspections. Finally, prepare multi-signature transfer plans to reduce single-point custody risk when handing assets to a state-designated custodian.
- Prepare records: maintain proofs of outreach and ownership.
- Check licences: confirm any designated custodian meets state requirements.
- Plan custody: use multi-sig or institutional controls for transfers.
As a practical matter, these steps reduce operational risk and help avoid disputes. Moreover, independent custody audits and pre-transfer reconciliations are advisable to prevent delays.
Controller Malia Cohen described the measure as “another important step toward modernizing California’s regulatory framework to reflect the realities of digital financial assets,” underlining the policy intent behind SB 822. For official guidance and ongoing updates, consult the California State Controller Office.
For further analysis and regulatory tracking, read our coverage of crypto regulations on BitcoinLinux. Firms affected by the law should also review internal compliance policies and consult counsel before transferring assets to the Controller.
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Author: NixCoin