California just made history in the crypto world. Governor Gavin Newsom signed Senate Bill 822 into law on October 11, 2025, making California the first state in America to stop the government from automatically selling people’s unclaimed cryptocurrency.
This matters because it changes how the state handles dormant crypto accounts. Before this law, if your Bitcoin or Ethereum sat untouched on an exchange for three years, the state could take it and immediately sell it for cash. Now, your crypto stays as crypto—giving you a real chance to get it back later.
How the Old System Hurt Crypto Owners
The previous rules created serious problems for crypto holders. When someone left their account inactive for three years, exchanges had to hand those digital assets over to California’s State Controller. The state would then liquidate everything—converting Bitcoin, Ethereum, and other cryptocurrencies into dollars.
This caused two major issues. First, if you came back to claim your assets years later, you only got the cash value from when the state sold it. If Bitcoin doubled or tripled in price since then, that growth was gone. Second, the forced sale could trigger capital gains taxes without your knowledge or consent, potentially creating an unexpected tax bill.
Source: leginfo.legislature.ca.gov
Under SB 822, California now preserves unclaimed crypto in its original form. Licensed custodians appointed by the State Controller will hold these digital assets securely instead of selling them off immediately.
Understanding the Three-Year Rule
The law kicks in after three years of inactivity on custodial accounts like those on Coinbase or Kraken. But “inactive” has a specific meaning. You can prevent your account from being flagged by showing signs of ownership interest, which includes making transactions, buying or selling digital assets, moving funds in or out of your account, or simply logging into your account.
Before any crypto gets transferred to the state, the exchange must notify you 6 to 12 months in advance. This gives you plenty of time to respond and restart the three-year clock. The notification must include a form you can return to confirm you’re still active.
If you don’t respond and your assets do get transferred to state custody, you still have options. The state holds the crypto in its original form for 18 to 20 months. During this window, you can file a claim and get your actual Bitcoin or Ethereum back—not just cash.
Only after this extended period can the State Controller convert the assets to dollars. Even then, you retain the right to claim either the original crypto or the proceeds from its sale.
What’s Protected and What’s Not
This law applies specifically to cryptocurrencies and stablecoins held by third-party custodians for California residents. If you use an exchange or wallet service, your holdings fall under these protections.
However, self-custody wallets remain outside the law’s reach. If you control your own private keys through a hardware wallet or other self-custody solution, the state has no way to access or report those assets. The law only binds companies holding crypto on behalf of others.
The law also excludes certain digital items like loyalty points, rewards program balances, in-game currencies, and SEC-registered securities. These fall under different regulatory frameworks.
Crypto Industry Celebrates the Win
The crypto community responded enthusiastically to the new law. Paul Grewal, Coinbase’s Chief Legal Officer, publicly thanked Governor Newsom on social media, stating the law “stops the state from liquidating Californians’ unclaimed crypto investments without their consent.”
Source: @iampaulgrewal
Senator Josh Becker, who sponsored the bill, saw it pass unanimously through both chambers of the California legislature in September. This bipartisan support shows growing recognition that digital assets deserve the same legal protections as traditional property.
Joe Ciccolo, Executive Director of the California Blockchain Advocacy Coalition, called SB 822 a source of “long-awaited clarity” that ensures digital financial assets are “handled consistently and responsibly.”
The law removes potential tax complications too. When the state sold crypto and returned cash under the old system, it could trigger capital gains taxes based on the state’s sale timing and price—not the owner’s choice. Holding assets in their original form avoids this problem entirely.
Setting a National Example
California’s leadership on this issue could influence other states. Over 45 states are currently advancing roughly 200 crypto-related bills through their legislatures. Michigan, Arizona, and Texas are considering initiatives involving Bitcoin as a strategic asset.
California State Controller Malia Cohen described SB 822 as “another important step toward modernizing California’s regulatory framework to reflect the realities of digital financial assets.”
The law updates California’s Unclaimed Property Law, which dates back to the 1950s. That original framework never anticipated cryptocurrencies, leaving legal uncertainty about how dormant digital assets should be treated. SB 822 fixes this gap by explicitly classifying digital financial assets as intangible property—putting them on equal footing with stocks, bonds, and bank accounts.
For exchanges and custodians, the law creates clear operational requirements. They must maintain accurate contact records, document all notification attempts, and prepare secure processes for transferring assets and private keys to state-designated custodians when necessary.
The Bottom Line
California just proved that states can protect crypto owners while still managing unclaimed property. By keeping digital assets in their original form and establishing clear timelines, SB 822 respects both the unique nature of cryptocurrency and the rights of people who own it.
This law won’t affect most active crypto users. But for anyone who might step away from their accounts for a few years—whether due to market conditions, life circumstances, or simple forgetfulness—it provides meaningful protection. Your Bitcoin will still be Bitcoin when you come back for it.