By Saleem A. Shareef, Esq., Checkpoint News
On October 11, 2025, California Governor Gavin Newsom signed legislation that subjects digital financial assets to the Unclaimed Property Law. (L. 2025, S822 (c. 660), effective 01/01/2026.)
Digital Financial Assets Treated as Intangible Property for Escheatment
The California Legislature clarifies that digital financial assets are intangible property that are subject to the unclaimed property law. “Digital financial asset” has the same meaning as in subdivision (g) of Section 3102 of the Financial Code. Pursuant to Cal. Civ. Proc. Cd. § 1510, any digital financial asset held or owing by a business association escheats to California if unclaimed by the owner for more than three years from either of the following: (1) the date a written or electronic communication to the owner is returned undelivered by the U.S. Postal Service or by electronic mail or other electronic messaging method, as applicable; or (2) the date of the last exercise of an act of ownership interest by the owner in the digital asset account if the owner does not receive written or electronic communications from the holder or the holder does not have the means of systematically tracking or monitoring the non-delivery of those communications.
Exercise of Act of Ownership Interest
The running of the 3-year period ceases immediately upon the exercise of an act of ownership interest in the digital asset account or written, oral, or electronic communication with the holder as evidenced by a memorandum or other record on file with the holder or its agents. An “exercise of an act of ownership interest” includes any of the following actions by the owner regarding the digital asset account: (1) conducting a transaction regarding the digital asset account, including buying or selling digital assets, depositing into or withdrawing from the account fiat currency or other property whether by a 1-time transaction or a recurring transaction previously authorized by the owner; (2) electronically accessing the digital asset account; (3) conducting any activity with respect to another digital asset account or any other property owned by the owner with the same holder; or (4) taking any other action that reasonably demonstrates to the holder that the owner knows that the property exists.
Determination of Jurisdiction
The last known address of an apparent owner, for the purpose of determining the jurisdiction over property subject to escheat, is either of the following: (1) the address used for purposes of delivering first-class U.S. mail; or (2) any description, code, or other indication of the location of the apparent owner that identifies the state of last known address, even if the description, code, or indication of the location is not sufficient to direct the delivery of first-class U.S. Postal Service mail to the apparent owner. If there is a conflict between the address and description, code, or other indication of the location, the address is deemed as the last known address of the apparent owner.
Notice Requirements
If the business association has a mailing address for the apparent owner of a digital financial asset in its records, which is not known to be inaccurate, the business association must send a notice to the owner via certified mail, return receipt requested. If the business association does not have a mailing address for the apparent owner of a digital financial asset in its records, and the apparent owner has consented to electronic service, the notice can be sent electronically.
Notice must be sent no sooner than six months, but no later than 12 months, before the time the asset becomes reportable to the California Controller. The notice must state at the top of the communication: “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,” or substantially similar language. The notice must specify the time when the asset will escheat and the effects of escheat, including the need to file a claim for the return of the asset. The notice must do all of the following, in boldface type or in a font a minimum of two points larger than the rest of the notice, exclusive of the heading: (1) specify that since the date of last interest, or for the last two years, there has been no indication of owner interest in the asset; (2) identify the asset by number or identifier, which need not exceed four digits; (3) indicate that the asset is in danger of escheating to California; and (4) specify that the Unclaimed Property Law requires business associations to transfer the asset if it has been unclaimed for three years.
The notice must include a form, prescribed by the controller, by which the owner can confirm the owner’s current address. If that form is completed, signed by the owner, and returned to the holder of the asset, or other device in which the owner’s property is being held, it is no longer considered inactive and the escheat period restarts. In lieu of returning the form, the holder can provide a telephone number or electronic means to enable the owner to contact the holder. If a holder is contacted by a presumed owner by telephone or electronic means, the holder must document that contact in a memorandum which the holder is required to keep on file. The contact serves to indicate owner interest in the asset and restarts the escheat period. The holder can give additional notice at any time between the date of last owner interest and the date the holder transfers the asset to the controller.
Private Keys
The holder of any partial key to any digital financial asset that is subject to escheatment must attempt to obtain the minimum number of keys required to transfer the assets within 60 days of determination that the assets are eligible for escheatment. “Private key” means a unique element of cryptographic data used for signing transactions on a blockchain that is known to the owner of the element.
Delivery Requirements
Digital financial assets are subject to the Unclaimed Property Law delivery requirements. In addition, the holder of any digital financial asset subject to escheatment must, no more than 30 days after the final date for filing a required report, transfer the exact digital financial asset type, private keys, and amount, unliquidated, to the controller’s cryptocurrency custodian or as the controller by regulation designates. If the holder possesses only a partial private key to the asset or is otherwise unable to move the asset to the controller, the holder must maintain the asset until the additional keys required to transfer the asset become available to the holder or the holder is otherwise able to transfer the asset to the controller. Regarding cryptocurrency custodians, the controller can select one or more custodians for the management and safekeeping of digital financial assets that have escheated to California. Any entity selected as a custodian must hold a valid license issued by the California Department of Financial Protection and Innovation.
Sales of Escheated Digital Financial Assets
Digital financial assets are subject to the Unclaimed Property Law sale requirements. In addition, digital financial assets held by the controller can be converted to fiat currency at prevailing prices by any method that the controller determines to be advisable. The controller must convert the assets no sooner than 18 months, but no later than 20 months, after the actual date of filing of a required report. If the assets delivered to the controller remain in the custody of the controller, a person making a valid claim for the assets is entitled to receive the assets from the controller. If the assets have been converted, the person is entitled to receive the net proceeds received by the controller from its sale.
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