California Governor Signs Law Protecting Unclaimed Crypto Assets from Forced Liquidation

Highlights:

• California becomes the first state to protect unclaimed crypto assets from liquidation.
• SB 822 keeps unclaimed crypto in its original form under state custody.
• The law requires custodians to notify owners before declaring assets unclaimed.

California has enacted a major law that guarantees the preservation of unclaimed crypto assets. Governor Gavin Newsom signed Senate Bill 822 to become the first state in the U.S. to have digital holdings preserved against forced liquidation. The new law will extend the state Unclaimed Property Law to cover cryptocurrencies like Bitcoin and Ethereum. It offers the long-awaited certainty to the management of dormant crypto accounts under state jurisdiction.

Senator Josh Becker of Menlo Park authored the bill, which was unanimously passed in both legislative chambers in September. Newsom signed it on Saturday, marking a new epoch of digital asset management. The law applies to crypto accounts that have been inactive after three years of failed attempts to contact the owner. Moreover, it ensures that the properties will not be sold for cash but will remain in their original digital form.

🚨 California’s Crypto Move Shows Crypto’s Growing Power

🇺🇸 California leads again : Governor Gavin Newsom just signed SB 822, making it the first U.S. state to protect unclaimed crypto like $BTC & $ETH from liquidation.

🔹 Crypto stays in original form (not converted to cash)… pic.twitter.com/PFAkMnAExo

— CryptosRus (@CryptosR_Us) October 14, 2025

Clear Rules for Handling Unclaimed Crypto Assets

SB 822 categorizes cryptocurrencies as intangible property according to California law. The classification provides equal treatment with other unclaimed assets, like security and bank accounts. Exchanges and custodians have also been required to observe tight notification and reporting measures. They should also reach out to account holders six to twelve months prior to reporting their assets as unclaimed.

Failure by the owners to respond requires the custodians to hand over the exact digital asset, including private keys, to a state-approved custodian within 30 days. These custodians will possess legitimate licenses from the Department of Financial Protection and Innovation. The State Controller is also permitted by the law to select one or more licensed custodians to protect unclaimed crypto assets.

Moreover, these digital assets may be sold by the Controller after 18 to 20 months without any claims of ownership by any owner. However, assets or their equivalent proceeds can still be reclaimed at any time by the rightful owners. This allows accountability while avoiding premature liquidation that may trigger unwanted tax events.

Modernizing Financial Laws for the Digital Age

The new legislation addresses a significant gap in the California financial system. So far, custodians have had no certainty regarding the treatment of dormant crypto assets. SB 822 gives California a guideline to ensure that consumers are considered and that transparency is upheld. Furthermore, it streamlines property laws that are decades old to align with the emergence of digital finance.

The decision has been applauded by leaders in the crypto industry. The Chief Legal Officer of Coinbase, Paul Grewal, applauded Governor Newsom for his support of the measure. Additionally, he noted that the law does not allow the state to liquidate the crypto of Californians without permission.

Thank you @GavinNewsom for signing SB 822, which stops the state from liquidating Californians’ unclaimed crypto investments without their consent. Also thank you @SenJoshBecker, who sponsored the bill. Now it's time for California to join the 46 other states, along with @secgov,…

— paulgrewal.eth (@iampaulgrewal) October 14, 2025

In addition, Governor Newsom also signed SB 243 alongside SB 822, establishing the first regulations on AI companion chatbots in the country. He established a task force in July to improve the operations of the state by means of the application of technology. Furthermore, he signed Assembly Bill 1180 in June, permitting the use of digital currency to make payments to state agencies.