California Approves Bill Regulating Cryptocurrency Payments and Unclaimed Digital Assets

California's lower house has approved a comprehensive bill aimed at regulating cryptocurrency payments and managing unclaimed digital assets. The legislation, known as Assembly Bill (AB) 1052, was passed unanimously on June 3 and seeks to subject cryptocurrency to the state's unclaimed property laws. Under this bill, if a user has not accessed their exchange account for three years, the state can take possession of the crypto holdings. This inactivity period is defined by actions such as making transactions, depositing or withdrawing funds, or accessing the account.

The bill also includes provisions that allow individuals and businesses in California to accept cryptocurrency as a form of payment for goods and services, as well as for private transactions. This dual approach aims to both regulate unclaimed crypto assets and promote the use of digital currencies in everyday transactions.

The bill now advances to the California Senate, where it may be modified, rejected, or passed on to Governor Gavin Newsom for his signature or veto. If enacted, the law will take effect on July 1, 2026, and will require anyone engaging in digital financial asset business activities to be licensed by the Department of Financial Protection and Innovation, unless they have an exemption.

Reactions to the new legislation have been varied. Critics argue that the bill represents an overreach of government power, while supporters contend that it addresses misconceptions about the bill's objectives. Eric Peterson, a policy director at the pro-Bitcoin nonprofit organization Satoshi Action Fund, who helped draft an earlier version of the law, clarified that the bill updates unclaimed property laws to ensure that crypto assets are transferred in their native form rather than being liquidated. This means that if a user's Bitcoin is turned over as unclaimed property, it will be held in Bitcoin form and can be reclaimed by the owner in the same form.

Peterson emphasized that the new law does not affect users who opt for self-custody of their crypto assets. He also noted that similar laws already exist for inactive bank accounts and brokerage accounts, and that the new legislation aims to fix a broken process that many states currently face. Hailey Lennon, a former regulatory counsel at a crypto exchange, echoed this sentiment, stating that most states have unclaimed property laws that exchanges comply with, and that these assets are returned to the owner upon request.

The passage of this bill marks a significant step in California's efforts to integrate cryptocurrency into its financial framework. By addressing unclaimed digital assets and promoting the acceptance of crypto payments, the state aims to generate additional revenue and ensure that unclaimed funds are put to public use. This move also reflects a broader trend of governments recognizing the legitimacy and utility of cryptocurrencies in modern financial transactions. However, it also raises important questions about the regulatory framework and security measures needed to protect these digital assets from fraud and theft.