California to Seize Inactive Crypto After 3 Years

• Under the new laws (Assembly Bill 1052 and the updated Senate Bill 822), digital assets are officially considered property.
• Before crypto is deemed abandoned, custodians must notify users 6–12 months ahead of the transfer deadline.
• Other states like Illinois, Delaware, and Arizona are revising dormant crypto rules, with some opting to liquidate unclaimed assets for cash.

California lawmakers have passed an important update to the state’s rules for lost and abandoned property, now including cryptocurrencies like Bitcoin. 

Under the new regulation (Assembly Bill 1052 and the updated Senate Bill 822), which Governor Gavin Newsom signed in 2025, digital assets are officially considered property. This means that if a crypto account shows no activity for three years on an exchange or in a custodial wallet, the state can take custody of it as unclaimed or abandoned property.

However, prior to the state claiming crypto as abandoned property, the service holding the assets must contact the user 6 to 12 months before the deadline.

This changes how states have typically handled forgotten property. In the past, some places would automatically sell off unclaimed crypto for cash. California’s rules now require that the original crypto be moved to a licensed holder, meaning owners still have a chance to recover their cryptocurrencies in the future.

Effects of the New Law

California’s law will likely create a model for other states to follow and help make crypto a more accepted part of the US legal landscape. 

The three-year inactivity rule essentially means “use it or lose it” for accounts held on exchanges. Users holding crypto for the long term, especially if they rarely check their exchange accounts, may now need to move their assets to a personal wallet or log in occasionally to avoid losing them to the state.

While the law protects owners by not forcing the sale of their crypto, it places a new responsibility on exchanges and wallet providers. They now have to set up reliable alert systems and careful record-keeping to stop assets from being taken by the state.

Interestingly, California isn’t the only state making law changes for crypto. Others, like Illinois, Delaware, and Arizona, are also updating their rules for dormant crypto, though some of these states plan to sell the crypto for cash if it’s not claimed.

That said, California’s method (keeping the crypto as is) is viewed as better for protecting the owner’s investment and, as such, has caught the eye of national officials and people in the industry.

Related: Crypto Leaders Oppose California’s 2026 Billionaire Tax Act