California Governor Gavin Newsom signed SB 822 into law on Oct. 11, making it the first state in the US to prevent the forced liquidation of unclaimed crypto.

The statute updates California’s Unclaimed Property Law to require that dormant crypto turned over to the state be held as crypto, not automatically converted to cash.

The policy addresses a friction point in digital asset escheatment, which is when exchanges or custodians turn over dormant accounts under existing unclaimed property laws. Most states immediately liquidate the crypto and hold fiat.

Owners who later reclaim their property receive the dollars at whatever price the state sold it for.

SB 822 changes that default. California will hold unclaimed digital financial assets in kind, appoint licensed crypto custodians to manage them, and return the original asset to claimants, unless narrow circumstances force conversion to fiat.

Coinbase’s legal team welcomed the signing, and industry commentary framed the in-kind requirement as aligning state treatment of crypto with existing handling of securities and bank accounts.

The policy removes a potential tax friction. When a state sells crypto and returns fiat, the transaction may trigger capital gains obligations for the owner based on the state’s sale price and timing. Holding assets in kind until claimed avoids that outcome.

SB 822’s in-kind requirement was presented as a harm reduction measure. If assets do escheat, owners can recover the original coins rather than liquidation proceeds.

The conversion authority serves as an administrative backstop for scenarios where holding volatile assets becomes impractical.

Who’s protected

The law applies to “digital financial assets” as defined by California Financial Code §3102(g), cryptocurrencies

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Author: Gino Matos