California Moves to Seize Unclaimed Crypto After Three Years

California has introduced a significant legislative move with Assembly Bill 1052, which aims to modernize unclaimed property laws by allowing the state to seize unclaimed cryptocurrency from exchanges after three years of inactivity. This bill ensures that cryptocurrencies remain intact and accessible to owners, rather than being liquidated by the state. The legislation mandates that exchanges transfer unclaimed digital assets to the state after three years of inactivity, defined as a lack of “an act of ownership interest” such as transactions or account access. Unlike traditional asset liquidation, the bill requires that seized cryptocurrencies remain in their original form, held by a custodian for eventual reclamation by the rightful owners. This approach aligns crypto assets with existing unclaimed property laws that govern bank accounts and other tangible assets, providing a legal framework that bridges conventional finance and digital currencies.

The bill’s passage has sparked debate within the crypto community, with some investors expressing concerns about privacy and control over their digital assets. Critics argue that state seizure contradicts the decentralized ethos of cryptocurrencies, particularly Bitcoin’s cypherpunk roots. However, proponents emphasize that the legislation does not transfer ownership permanently but rather safeguards assets until owners claim them. Eric Peterson, policy director at the Satoshi Action Fund, clarified that the state will hold Bitcoin in its native form, preventing forced liquidation and preserving potential future value. This distinction is crucial, as it mitigates risks associated with forced sales at unfavorable market conditions, a common concern among crypto holders.

Assembly Bill 1052 represents a broader effort by California to regulate digital asset payments and crypto business activities comprehensively. By integrating cryptocurrencies into existing unclaimed property statutes, the state provides clarity and legal certainty for exchanges and investors alike. This regulatory alignment helps reduce ambiguity in the treatment of dormant crypto accounts, fostering a safer environment for digital asset custody and ownership verification.

One of the notable benefits of AB 1052 is the preservation of asset integrity during the unclaimed period. Since cryptocurrencies are held in their original form, owners who reclaim their assets could benefit from any appreciation in value that occurs while the state holds custody. Conversely, there is inherent risk if the asset value declines during this time. Nonetheless, the bill ensures that owners retain the right to recover their holdings without loss due to forced liquidation. This mechanism encourages investors to maintain active engagement with their accounts to avoid state custody but provides a safety net for those who become temporarily inactive.

Following its passage in the California House, AB 1052 now proceeds to the Senate, where it may undergo further review, amendments, or approval. Stakeholders, including crypto investors, exchanges, and regulatory bodies, are closely monitoring the bill’s progress. If enacted, California would join a growing number of jurisdictions adapting traditional financial regulations to accommodate the unique characteristics of digital assets. This legislative evolution underscores the increasing mainstream acceptance of cryptocurrencies and the necessity for clear, investor-friendly regulatory frameworks.

California’s Assembly Bill 1052 introduces a pragmatic approach to managing unclaimed cryptocurrency by aligning digital assets with established unclaimed property laws. By ensuring that seized crypto remains intact and reclaimable, the bill balances regulatory oversight with investor protection. While concerns about privacy and control persist, the legislation offers a transparent and legally sound framework that could serve as a model for other states. Crypto holders are encouraged to stay informed and maintain active management of their assets to avoid unintended state custody, while the broader market watches closely as California shapes the future of digital asset regulation.