Author | Ethan(@ethanzhang_web3)
Recently, discussions within the crypto community about "the U.S. state of California officially confiscating assets from dormant exchange accounts" have been intensifying. Don't panic just yet. Upon closer examination, you'll find this is actually the delayed spread of an "old news" story.
This bill, known as SB 822, was actually signed by California Governor Newsom as early as October 2025 and is set to take effect in 2026. Its essence is to formally replicate the "dormant account management system" (officially called the Unclaimed Property Law, or UPL), which has been operating in the traditional banking system for decades, into the crypto world.
However, there is a significant amount of misinterpretation and panic within the community, with many mistakenly believing that simply "HODLing coins without moving them" will lead to confiscation. Odaily Planet Daily will clarify for readers in this article: Who exactly does this bill regulate and who does it not? Is this so-called "regulatory custody" a trap or a protection? As ordinary investors, how can we take simple steps to securely safeguard our coins.
Core Mechanism: How the "Three-Year Rule" Works When "HODL" Turns into "No Contact"
According to the provisions of SB 822, if a digital asset account shows no "indication of owner interest" for a period of three years, and communications sent by the exchange are returned or undeliverable, the asset will be deemed "unclaimed" and trigger the escheatment process.
This sounds terrifying, as if simply being a long-term "diamond hands" holder will get your assets seized. But that's not the case. The bill defines "indication of owner interest" extremely broadly, which actually forms the first protective barrier for active users.
SB822 Bill Original Text
So-called "indication of owner interest" doesn't just mean on-chain transfers or crypto-to-crypto trades. According to the bill text, the following actions are all considered proof that you still control the account and can directly reset the three-year countdown:
- Logging into the account: Even if you just open the App to check your balance, or log in once via the web portal, it counts as an "electronic access," sufficient to reset the timer.
- One-time or recurring transactions: Whether buying, selling, depositing, or withdrawing fiat, or even a pre-set recurring investment plan executing one automatic deduction, all count as activity.
- Cross-account activity: If you have multiple accounts with the same exchange (e.g., a spot account and an earn account), activity on any one of these associated accounts will be considered activity for all.
- Simple communication: Sending a customer service email, or clicking a confirmation link in a query email from the exchange, are considered "indication of owner interest."
This means that unless you are completely out of contact—not logging in, not trading, and ignoring all emails and notices—your assets will absolutely not be transferred without warning.
Is There a Warning Before "Confiscation"?
To prevent users from losing assets passively due to forgetfulness, SB 822 establishes a clear mandatory notification procedure.
As per the regulations, the exchange, as the holder of the assets, must send a notice to the user 6 to 12 months before reporting the assets to the state government. This notice is not a routine user agreement update; its format has strict legal requirements. The top of the notice must be clearly marked in bold: "The State of California requires us to notify you that your unclaimed property may be transferred to the state if you do not contact us".
SB822 Bill Original Text
Furthermore, this notice must include a form prescribed by the State Controller's office. The user simply needs to fill out and return this form, or contact the exchange to confirm their identity via phone, online chat, etc., and the account's dormant status will be immediately lifted, and the so-called three-year countdown will be reset to zero.
The Biggest Misconception: Does Transfer Equal "Liquidation"?
Prior to SB 822's implementation, the biggest concern in the community was that assets would be forcibly sold once transferred, similar to traditional securities. However, SB 822 explicitly prohibits immediate forced liquidation, making California the first state in the U.S. to legislate the "in-kind transfer" of unclaimed crypto assets. "In-kind" here refers to the asset itself and the associated private keys.
To achieve this operation, the bill even details the handling of "private keys." If the exchange only holds part of the private key (e.g., a multi-signature wallet), the bill requires it to attempt to obtain the remaining keys within 60 days; if ultimately unable to obtain them, the exchange must continue maintaining the asset until transfer conditions are met, thus technically preventing asset loss.
Going a step further, once assets enter the state's custodial account, they are granted a protection period of 18 to 20 months. During this time, the state government typically will not sell the assets, and the original owner can still apply to reclaim the original quantity of tokens. Only after this protection period ends does the state government have the authority to liquidate them.
Who Acts as Custodian?
Facing the massive demand for digital asset custody, the SB 822 bill authorizes the State Controller to select one or more "qualified custodians" to manage these assets. These custodians must hold a valid license issued by the California Department of Financial Protection and Innovation (DFPI) and must meet a series of strict standards, including:
- Security Level: Must possess top-tier cybersecurity measures and private key management capabilities.
- Compliant Status: Must qualify as a "financial institution" under the Bank Secrecy Act, bearing anti-money laundering obligations.
- Industry Experience: Must have proven experience handling digital assets (e.g., institutional-grade service providers like Coinbase Custody or Anchorage Digital).
Are Cold Wallets Affected?
In community discussions, many experienced players are most concerned about: Are my cold wallets where I control the private keys affected? Are my LP tokens in Uniswap affected?
The answer is clear: They are not affected.
The bill's regulatory target is defined as the "Holder", meaning a third-party centralized institution that has control over the assets. Since self-custody wallets are controlled directly by the user via private keys, there is no third party that can report or transfer assets to the government. As long as the private keys are in your own hands, the assets fall outside the jurisdiction of this bill.
Furthermore, the bill makes precise distinctions regarding "digital financial assets," explicitly excluding in-game virtual currency, commercial reward points (like airline miles), and tokens already registered as securities with the SEC, avoiding over-broad regulation.
Practical Guide: How to Reclaim Transferred Assets?
As mentioned earlier, even if assets have been transferred to the state's name, the property rights of the original owner and their lawful heirs do not disappear, and the right to file a claim with the California State Controller's Office has no time limit. The specific outcome of a claim depends on the timing of the application: if applied for before the assets are liquidated (i.e., within the 18-20 months after government receipt), the owner can reclaim the original quantity of cryptocurrency; if applied for after liquidation, only the net cash proceeds from the sale of the assets can be reclaimed.
It is important to be wary here: as the bill takes effect, fraudulent intermediaries offering to file claims might appear on the market. The California State Controller's Office website (sco.ca.gov) is the only official channel for queries and claims, and this process is free of charge. Any request for an advance fee to "unfreeze" assets is potentially fraudulent.
How to Avoid Custody Risks?
The core of avoiding SB 822 risk lies in periodically breaking the account's silent status. Since the bill's trigger is "no activity for three consecutive years," long-term holders only need to perform simple indications of owner interest regularly. For example, logging into the exchange account once a year, clicking to check the balance, or conducting a very small trade. These actions will all be recorded by the system as active status, thereby resetting the three-year countdown.
For users holding large amounts of assets, the most thorough solution is to withdraw the assets to a non-custodial wallet. Once assets leave the exchange and enter a cold wallet where you control the private keys, they are no longer "custodial assets" as defined by the bill, thus exempt from the Unclaimed Property Law's jurisdiction at the root. This not only avoids政策性 transfer risks but also defends against potential misappropriation or collapse risks of the exchange itself (think of the FTX lesson).
Furthermore, an often overlooked aspect is estate planning. Often, assets become "unclaimed" because the holder passes away unexpectedly, and the family is completely unaware of this digital wealth's existence. SB 822 objectively provides an administrative safety net mechanism for these accidentally lost digital assets. Therefore, acting responsibly towards family wealth, it is advisable to create a memo detailing the location of assets and properly inform family members, ensuring that in extreme cases, they can search through official channels and reclaim these digital inheritances.
Conclusion: The Double-Edged Sword of Compliance
The enactment of the SB 822 bill is undoubtedly another milestone in the process of crypto assets moving towards mainstream adoption. It grants digital assets legal status equivalent to bank deposits and stocks, offering special preferential treatment particularly in preventing forced liquidation. This move also signals that regulators are earnestly recognizing the unique attributes of crypto assets and striving to find a balance between protecting consumer rights and adapting to technological characteristics.
At first glance, the state government's action might seem like "meddling," but delving into its underlying logic reveals it is actually a powerful constraint on third-party custodial power. Without a mature legal framework for establishing rights, those vast fortunes lying dormant due to forgetfulness, accidents, or user disconnection could ultimately become the exchange's "private property."
The SB 822 bill, through administrative backup means, creates a permanent "lost and found" for digital assets, successfully pulling personal wealth that might otherwise have vanished due to platform shutdowns back within the red line of legal protection.
