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California Bill Would Require Custodial Wallet Providers to Turn Over Unclaimed Assets After Three Years

Such ‘escheated’ assets would be held in trust by the state, and a license for any digital assets business would be required.
By: Leo Jakobson • April 01, 2025
California Bill Would Require Custodial Wallet Providers to Turn Over Unclaimed Assets After Three Years

Avelino Valencia, a member of the California State Assembly, has introduced an amendment to the recently floated Money Transmission Act to enable the acceptance of digital assets and to create a system in which unclaimed cryptocurrency will be handed over to the state.

In a reminder of the phrase “not your keys, not your coins,” the Digital Financial Assets Law by the chair of the Assembly’s Banking and Finance Committee would apply escheat laws to crypto held by a third party, such as centralized exchanges, and left unclaimed and untouched for three years.

After that time, unclaimed crypto held by a third party must be “escheated” to the state, meaning handed over for safekeeping. While California does not seize escheated funds, it does require the owner to prove ownership before they are returned, raising privacy concerns.

Escheat is commonly applied to gift cards when people leave part or all of a card unspent for years.

Unrestricted Use of Crypto

Beyond those provisions, the bill also prescribes a license from the state Department of Financial Protection and Innovation to engage in any digital financial assets business.

It also authorizes individuals and businesses to accept payment in digital assets and would deem such transactions to be legal.

The bill would also prohibit any public entity “from prohibiting, restricting, or imposing any requirements on that use.”

Beyond that, it would prohibit any public entity from taxing, withholding or making an assessment or other charge on a digital asset solely because it was used as a method of payment.

The bill would also prohibit public officials “from using their official position to make, participate in making, or influence a governmental decision in which the official knows or has reason to know that the official has a financial interest.”

Not Your Coins

The escheat provisions apply to persons whose last known address is in California.

It comes into effect in two ways. First, it will kick in three years after a mail or electronic communication is returned as undeliverable or if there is no way to communicate with the owner.

Second, crypto will be escheated if there is no “exercise of an act of ownership interest.”

An act of ownership interest would include making a transaction from or to the account, electronically accessing the account, conducting any activity with a different account held by the same owner, or “taking any other action that reasonably demonstrates to the holder that the owner knows that the property exists.”

The bill also instructs the State Controller to create procedures for the secure storage of the escheated assets.

Our articles are stored on Filecoin.

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