Over the weekend, California Governor Gavin Newsom enacted a law that safeguards abandoned Bitcoin (BTC) holdings, aiming to streamline recovery processes and reduce the burden on exchanges. This legislation amends the existing unclaimed property law (UPL) and mandates that abandoned Bitcoin must remain in its original form, rather than being immediately sold for cash.

This initiative aligns California with states like Delaware and New York that have also integrated crypto within their unclaimed property regulations. The law, which received unanimous support, signifies a vital update to old UPL legislation.

Key Provisions of the Law

The law declares that Bitcoin or cryptocurrency is considered abandoned if no action has been taken for three years, including deposits, withdrawals, or logins. Importantly, this applies exclusively to custodial platforms, with non-custodial wallets exempted. Custodians must notify owners six months after declaring property abandoned.

Furthermore, the new statute prevents immediate liquidation; it allows the state to maintain the crypto for up to 18 months before any potential sale. Eric Peterson from the Satoshi Action Fund indicated that this law could result in investors reclaiming their full Bitcoin, stating, “The state will send you your Bitcoin back in Bitcoin, rather than liquidating it years ago and sending it in cash.”

Paul Grewal from Coinbase praised the law as a significant advancement for crypto investor protection rights, emphasizing the ongoing struggle lawmakers face in reconciling cryptocurrency with antiquated legislation, which often complicates legal clarity.

As states continuously update their regulations, this law may also set a precedent, influencing how other states might approach cryptocurrency governance in the future.