‘Unclaimed’ Bitcoin in California Could Be Seized—But There’s a Catch

California lawmakers passed a bill through the House on Tuesday that would require the state to seize unclaimed customer cryptocurrency holdings from exchanges after three years of inactivity, due to not “showing an interest” in their holdings.

But while the bill has already stoked crypto investors’ jitters and led to pushback across social media, there may be reason to breathe a sigh of relief.

Proponents of the bill say that it allows for unclaimed Bitcoin and other digital assets to not be liquidated by the state, but rather held by a custodian for customers to reclaim later—so there’s no risk that an investor’s tokens could be sold at a loss without their consent.

Under Assembly Bill 1052, which aims to broadly regulate digital asset payments and crypto business activities in California, cryptocurrency holders must perform “an act of ownership interest” at least once every three years to prevent their tokens from becoming the state’s property. Those acts would include conducting transactions involving their digital asset accounts or at least electronically accessing their accounts, among other qualifying actions.

The draft legislation passed the House 78-0 on Tuesday, according to the California State Assembly’s website. It will now go to the California Senate, where it could be modified, rejected, or passed without changes. 

The draft legislation, if signed into law, would make cryptocurrencies subject to the unclaimed property law—the same rules that govern ownership transfers of traditional assets such as bank accounts and safe deposit box holdings.

It’s a possibility that has divided some members of the crypto community.

Some critics bashed the bill, arguing it largely violates the privacy-focused cypherpunk ethos that underscores the Bitcoin movement. That interpretation has fueled a growing array of posts from Bitcoiners advocating for self-custodying assets rather than relying on exchanges. However, supporters of the bill have suggested such concerns are largely overblown.

Panic over whether Californian officials could permanently seize one’s Bitcoin under the terms of the recently passed bill “are incredibly incorrect,” Eric Peterson said Wednesday in an X post. Peterson, a policy director at pro-Bitcoin nonprofit organization Satoshi Action Fund, previously championed an earlier version of the bill.

“When your Bitcoin is turned over as unclaimed property from an exchange, it stays in the form of Bitcoin rather than being liquidated,” Peterson said in the post. “You can then get it back from California in Bitcoin.”

Crypto-focused lawyer Hailey Lennon doubled down on the point in her own X post on Wednesday, saying that the type is law is common.

“Most states have unclaimed property laws that exchanges comply with,” Lennon said. “It’s returned to the owner when the owner reaches out to the state.”

Peterson suggested that since seized Bitcoin could appreciate in value over time, customers who reclaim their assets would benefit from those gains rather than receive the U.S. dollar value of the assets from the time of liquidation. Of course, the opposite is also true: crypto assets could also fall in value while in the custody of the state.

What’s ultimately key is that customers’ assets remain intact, even if the state holds them.

In a subsequent X thread, Peterson further clarified the matter: “No one touches your keys or your wallet,” he wrote. “AB 1052 says: Hold them as they are.”

Edited by Andrew Hayward