Understanding California’s SB 822

Impact of California’s SB 822 on Digital Assets

California’s Senate Bill 822 (SB 822), signed by Governor Gavin Newsom in October 2025, positions California as the first state in the U.S. to safeguard unclaimed crypto assets from forced liquidation.

This legislation aligns digital assets with bank accounts and securities, mandating the transfer of unclaimed cryptocurrencies in their original form to prevent undesired taxable events for asset holders like Bitcoin (BTC) and Ether (ETH). Such measures avoid unapproved forced liquidations which can negatively affect users.

SB 822 has revolutionized the treatment of digital assets by including them under California’s Unclaimed Property Law, creating a regulatory framework that clearly defines their handling and transfer. With this legislation, account holders can either reclaim their digital assets or, if sold, receive the net proceeds by submitting a claim to the State Controller.

Authored by Senator Josh Becker, SB 822 revises the state’s older Unclaimed Property Law. After passing through the legislature in September 2025, it was enacted by Governor Gavin Newsom.

Did you know? Self-managed wallets are generally excluded from these unclaimed-property laws due to the absence of a third-party holder. However, risks still persist for users, including lost keys or forgotten passwords that can restrict access to their assets.

What Constitutes Unclaimed Property?

Unclaimed property, or escheatment, includes financial assets left inactive or unclaimed by owners for an extended period, usually three years. After this, the state assumes control of the assets.

The application of unclaimed-property laws to cryptocurrencies has been contentious. The decentralized nature of crypto raises classification issues as cash, property, or a distinct asset class, creating compliance challenges for custodians and exchanges in asset transfer without instigating tax liabilities for users.

Initial drafts of California’s SB 822 included provisions for custodians to liquidate crypto prior to remittance, potentially harming user interests. Joe Ciccolo from the California Blockchain Advocacy Coalition commented that the finalized version better protects consumers.

Mechanism of California’s SB 822

SB 822 lays out clear guidelines for managing unclaimed cryptocurrencies within the state’s Unclaimed Property Law, categorizing digital financial assets as intangible properties subject to escheatment regulations.

The legislation considers assets abandoned after three years without any sign of owner activity. It excludes game tokens and loyalty points. Before reporting to the state, holders (custodians or exchanges) must send notifications to owners six to twelve months prior and allow them to reactivate accounts to reset the dormancy period.

Once recognized as unclaimed, assets must be conveyed in their native form within 30 days to a designated state crypto custodian. The State Controller can decline custody based on the interests of the state. Approximately 18-20 months later, the state may convert these holdings to fiat currency; claimants can either reclaim the original cryptocurrency or its equivalent value.

Did you know? Claims usually bear no statute of limitations once the assets are transferred to state custody, meaning recovery of lost crypto may be possible even years later, albeit with necessary proof of ownership.

Practical Implications of SB 822

Gaining insight into how digital assets qualify as unclaimed property in California is vital for custodians and account holders.

Here’s an example of a dormant wallet scenario: Allan holds Bitcoin on a California exchange but does not log in for three years. Prior to marking his account as unclaimed, the exchange must send him a notice six to twelve months ahead. If there’s no response, the exchange must report and transfer the unchanged, unliquidated crypto to a state custodian within 30 days. Allan retains the ability to file a claim with the State Controller’s Office later to retrieve his coins.

Edge Cases

If a holder cannot contact the owner due to outdated information, the asset still qualifies as unclaimed. If the owner claims after liquidation by the state, it could raise questions regarding the valuation date and capital gains under federal law.

Compliance for Exchanges

Platforms must maintain comprehensive records of owner communications and ensure secure asset transfers, employing standardized notification forms as required by the State Controller. Coordination with state custodians for compliance is essential.

Why SB 822 Matters

California’s SB 822 represents a pivotal shift in the management of digital assets under state law, facilitating smoother operations for all parties involved: users, holders, custodians, and regulators.

• For crypto holders: The bill stops forced liquidation of unclaimed assets, reinforcing owners’ rights to reclaim custody while their crypto remains with the state.
• For custodians and exchanges: The law places substantial compliance requirements for record-keeping, notifications, and asset transfers.
• For authorities and regulators: SB 822 could generate revenue if state-held assets are sold after a defined waiting period, establishing California as a pioneer against forced crypto liquidations—an example that could influence other states.

Did you know? Staking rewards and airdrops may complicate the management of unclaimed crypto. Some jurisdictions expect custodians to maintain assets including any rewards accrued during custody.

California’s SB 822 and National Trends

This law mirrors global initiatives to assimilate cryptocurrency into existing property frameworks. Other U.S. states, like Arizona and Texas, have also worked towards these regulations.

• Arizona: May 2025’s HB 2749 categorized “digital assets” and “virtual currency” under its unclaimed property laws, marking three years of inactivity as grounds for abandonment.
• Texas: Effective September 2025’s SB 1244 imposes a similar three-year dormancy rule based on the last activity or failed communications with owners.

California’s framework maintains a three-year dormancy with a mandate for unliquidated crypto transfers, prioritizing consumer protection over potential liquidation that other states allow.