Governments from all around the world are putting up efforts to protect unclaimed cryptocurrencies, and the U.S. state of California has become successful in doing so, as well as being the first state ever to do so.
In an important shift in how governments manage dormant digital assets, California is the first US state to expressly prevent unclaimed cryptocurrency from being forcefully converted to cash.
How is this better?
Over the weekend, Governor Gavin Newsom signed Senate Bill 822 into law, guaranteeing that cryptocurrency assets such as Bitcoin and Ethereum be kept in their original status when they are placed in state custody under the state’s Unclaimed Property Law (UPL).
Before being approved by the governor on Saturday, the law, which was written by Senator Josh Becker (D-Menlo Park), was unanimously approved by both houses in September.
The legislation revises California’s long-standing UPL, which regulates the state’s handling of financial assets that are inactive, including securities, insurance payouts, and bank accounts that have been closed.
The new laws close a long-standing legal void regarding the treatment of dormant cryptocurrency holdings by formally classifying digital financial assets as intangible property subject to the same framework.
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Accounts that are left unattended for a minimum of three years after unsuccessful contact efforts are subject to the modification.
The clear in the confusion
There was a lot of confusion earlier on how these procedings are to be followed. In the past, custodians and exchanges were unsure of their duties and reporting protocols due to the uncertainty around digital assets.
According to SB 822 guidelines, it is clearly stated that custodians of digital assets must provide the owners notice of at least six to twelve months before the item being listed as unclaimed, or something with no absolute ownership.
In order to enable users to recover or reactivate their holdings prior to state involvement, notifications must adhere to a standardized format authorized by the Controller’s Office.
What this means for the holders?
Holders have 30 days from the start of the escheatment procedure to give the precise kind and quantity of the asset, as well as the pertinent private keys, to a state-approved custodian.
Valid licenses from the Department of Financial Protection and Innovation are required for these custodians.
After 18 to 20 months, the Controller may convert unclaimed cryptocurrency to fiat, but the legitimate owners will still be able to get their assets back or the equal amount of the sale revenues.
This can be a good sign for California, when it comes to looking at crypto regulations. It gives a more systematic approach towards regulating and protecting unclaimed crypto or digital assets.
Also Read: California Man Sentenced To Prison For Over 4 Years For Laundering $36.9M In Global Crypto Scam