California’s New Crypto Escheatment Law: What It Means for Businesses Nationwide

California just made unclaimed property history—and it could reshape how your business handles digital assets.

With the signing of Senate Bill 822, California became the first state in the U.S. to officially protect unclaimed cryptocurrency from forced liquidation during the escheatment process. This is a game-changer for companies managing digital financial assets like Bitcoin and Ethereum, and it raises important implications for all holders—especially those operating in multiple states.

At Advisely LLC, we’re already helping clients understand and adapt to these new rules. Here’s what you need to know—and how to prepare.

🔍 What Is SB 822?

SB 822 updates California’s Unclaimed Property Law (UPL) to explicitly include digital financial assets as a form of intangible property. This includes cryptocurrencies such as Bitcoin and Ethereum that are:

• Dormant for three years

• Owned by a person with a California-based address

• Subject to failed contact attempts

Previously, ambiguity in the law left crypto in legal limbo—and created operational confusion for holders. Some custodians were converting crypto to cash before remitting it to the state, potentially creating taxable events for the rightful owner and violating the spirit of escheatment laws.

SB 822 changes all that.

💡 Key Highlights for Holders

Here’s what businesses (aka “holders”) should know:

1. No More Forced Liquidation

Holders must now transfer digital assets “as-is”—in their original form, including private keys—when reporting unclaimed crypto. Bitcoin and Ethereum cannot be converted to fiat currency before escheatment.

This minimizes tax exposure for the owner and aligns with how other intangible property types (like stocks or gift cards) are treated.

2. Pre-Escheatment Notice Still Applies

Just like traditional unclaimed property, holders must send a due diligence notice to the apparent owner 6–12 months before reporting the property to the state. California now requires a Controller-approved form for crypto notices.

If the owner responds in time, the dormancy clock resets. If not, the asset is remitted—but securely, and without liquidation.

3. Licensed Custodians Only

The bill requires that only state-licensed crypto custodians—authorized by the Department of Financial Protection and Innovation (DFPI)—can hold escheated digital assets on California’s behalf.

This provision not only ensures better security for escheated crypto, but also signals to national and international regulators that California is approaching digital assets with both rigor and responsibility.

🌎 Why This Matters Beyond California

Although SB 822 is a California-only law, it sets a powerful precedent for other states—and for holders operating across jurisdictions.

Several other states, including Michigan, Arizona, and Texas, are exploring crypto-specific escheatment policies. Businesses with customers or wallet holders in these states should expect similar rules to follow, particularly around asset preservation and due diligence requirements.

🧠 Advisely’s Take: What You Should Do Now

If you’re a fintech, crypto platform, exchange, or any business holding customer crypto, here’s how Advisely can help you prepare:

• Audit Your Dormant Crypto Holdings

Map out your crypto wallet activity and dormant thresholds to see which assets may be subject to escheatment under CA’s new rules.

• Update Your Due Diligence Process

Ensure your owner outreach for digital assets follows California’s 6–12 month notice window, using the required formats. Don’t assume legacy templates are compliant.

• Review Your Escheatment Procedures

If you’ve been converting crypto to cash prior to remitting it, stop. That may now violate CA law—and result in penalties or reputational risk.

• Plan for Multistate Expansion

Even if your business isn’t based in California, your users might be. And other states are watching. Now’s the time to modernize your escheatment protocols across all asset types—digital and traditional.

🏢 Let’s Talk — Especially If You're in Crypto or Fintech

Based in Red Bank, NJ, Advisely LLC helps companies across the country navigate complex unclaimed property rules. From traditional A/P cleanups to cutting-edge crypto compliance, our team of former auditors and industry experts can help you reduce risk and stay ahead of regulation.

📌 Final Thoughts

California’s SB 822 is more than a crypto law—it’s a wake-up call for holders of all unclaimed property to revisit their compliance strategy. As states continue modernizing their laws, businesses need clear policies that align with evolving rules—especially for digital assets.

Don’t wait until a notice arrives. Get ahead of it.

📧 Need help reviewing your crypto escheatment policies?

Reach out to us at eburke@adviselyllc.com or visit www.adviselyllc.com