Could the State Seize Crypto Assets with the New California Crypto Law?

California is moving closer to becoming one of the first U.S. states to regulate dormant cryptocurrency accounts.

A new bill passed in the State Assembly aims to categorize untouched crypto holdings as unclaimed property, the same category used for forgotten bank accounts and unclaimed insurance payouts.

If this bill becomes law, crypto assets left idle on an exchange for more than three years could be seized and held by the state until claimed by the rightful owner.

This proposal is raising eyebrows across the crypto community. While it hasn’t been signed into law yet, it could reshape how digital assets are treated in the United States.

If you are interested in crypto trading, explore Bitrue and enhance your experience. Bitrue is dedicated to providing safe, convenient, and diversified services to meet all crypto needs, including trading, investing, purchasing, staking, borrowing, and more.

Key Takeaways

1. California’s bill targets crypto that hasn’t been accessed for three years, treating it like other unclaimed property under state law.

2. Exchanges would be required to hand over dormant crypto to the government, though owners can file claims to recover it later.

3. The law may impact long-term HODLers, especially those who forgot about small balances or abandoned old accounts.

What is the California Crypto Bill Trying to Do?

The bill aims to include cryptocurrency in California’s Unclaimed Property Law, which has historically applied to forgotten savings accounts, checks, or unclaimed safe deposit box contents. 

Now, California lawmakers want to treat inactive crypto balances on exchanges the same way.

Here’s how it would work in practice:

1. If a crypto holder hasn’t accessed, moved, or interacted with their funds for three years, the exchange where those assets are held would be required to classify the funds as dormant.

2. The exchange would then transfer the crypto’s value to the state of California, where it would be held until claimed by the original owner.

3. To get it back, the rightful owner would have to go through the state’s claims process, which is typically used for recovering forgotten funds or lost property.

This legislation is an attempt to bring crypto in line with traditional finance rules, especially when it comes to inactive holdings. 

While the intent might be consumer protection, many in the crypto space see it as a government overreach that misunderstands how digital assets are used.

Read Also: California Crypto Law Explained 2025

Why Crypto Holders are Concerned

Crypto is fundamentally different from fiat money. It’s borderless, often decentralized, and users have varying philosophies on asset management, especially when it comes to long-term holding.

Many investors take a “HODL” approach, which means holding onto crypto for years without trading or even logging in.

Some also store small balances on old exchange accounts they don’t use anymore, either forgetting about them or intentionally leaving them as low-risk experiments.

This bill could lead to some unexpected consequences:

1. Long-term holders could lose access to funds they intentionally left untouched.

2. Users who lost access to email accounts or forgot passwords might miss warning notices.

3. There could be legal challenges if users dispute ownership or state handling procedures.

The bill also raises privacy concerns. Once assets are in state control, users might need to provide sensitive documents or go through extra verification steps to reclaim what was originally theirs. 

For a community that values financial sovereignty and self-custody, this proposal feels intrusive.

Read Also: SEC Approves First Solana Staking ETF: A Major Milestone for Crypto Investment

How the Process Could Work for Seized Crypto

If the bill becomes law, here’s a possible step-by-step of how it would unfold:

Dormancy is Detected

Crypto held on an exchange without activity for three consecutive years would be flagged as dormant. “Activity” could include logging in, making a trade, or even updating account settings.

Exchange Transfers Value to the State

The crypto isn’t physically sent to the government wallet; rather, the exchange may liquidate the holdings and send the fiat equivalent to the state’s Unclaimed Property Fund.

Owner Must Reclaim the Funds

To retrieve their funds, the original holder would need to file a claim through the California State Controller’s Office, verify their identity, and complete paperwork.

For users who are no longer in California, moved abroad, or lost access to their old exchange emails, this recovery process could be slow and complicated.

Read Also: Understand Crypto Stablecoin Bill Senate Vote

What Comes Next: Senate Review and Beyond

As of now, the bill has passed California’s State Assembly, which means it cleared one big hurdle. But it’s not the law yet. It still needs to be:

1. Reviewed and approved by the California Senate

2. Signed by the governor

3. Implemented through regulatory guidance and coordination with exchanges

If all those steps go through, California would become the first U.S. state to treat inactive crypto as unclaimed property in this way.

This move could inspire similar bills in other states, especially those with active crypto communities or large exchange operations.

Lawmakers might view this as a way to improve consumer protection, but many industry participants worry that it creates new risks and regulatory burdens.

Read Also: New Crypto Regulation for California is About to be Officiated! Bill Passes Committee

What Should Crypto Holders Do Now?

If you’re a crypto user in California (or even elsewhere in the U.S.), here are a few smart steps to stay ahead:

1. Log into your exchange accounts regularly to show activity, even if you don’t plan to trade.

2. Consolidate old or forgotten accounts into wallets you actually monitor.

3. Enable notifications and keep your email addresses up to date with your exchange accounts.

4. Consider self-custody options if you want to avoid third-party rules altogether.

While this law isn’t active yet, it’s a good reminder to check in on your holdings. In crypto, inactivity isn’t always harmless, especially if regulators are watching.

Read Also: XRP News: SEC vs Ripple and the Status of Its Appeal

Conclusion

The California crypto bill is a big wake-up call for digital asset holders, especially those who believe in holding long-term or managing multiple wallets.

If passed, it could redefine how we think about asset ownership, government authority, and what counts as “unclaimed” in a decentralized world.

For now, the bill still needs to clear the Senate and get a final sign-off before becoming law. But it’s already creating conversations that may ripple across the U.S. and possibly globally.

As regulators move to integrate crypto into existing legal frameworks, it’s essential for users to stay informed, stay active, and take control of their holdings.

When it comes to managing and protecting your assets, make sure you’re using tools and platforms that prioritize security and transparency.

Bitrue is a trusted exchange that offers a safer way to trade, store, and track your crypto, with full control and peace of mind.

FAQ

What does the California crypto bill do?

It allows the state to classify crypto left untouched for three years on exchanges as unclaimed property, transferring it to state control until reclaimed.

Is the bill already a law?

Not yet. It has passed the State Assembly but still needs approval from the Senate and the governor’s signature to become law.

Will the state actually hold crypto?

Likely not directly. Exchanges may convert the crypto to fiat before sending the funds to the state’s unclaimed property office.

Can I still get my crypto back if it’s taken?

Yes, but you’ll need to file a claim through California’s official unclaimed property process and prove ownership.

How can I avoid having my crypto seized?

Stay active on your exchange accounts, enable alerts, update your info, and consider moving important assets to wallets you control directly.

Disclaimer: The views expressed belong exclusively to the author and do not reflect the views of this platform. This platform and its affiliates disclaim any responsibility for the accuracy or suitability of the information provided. It is for informational purposes only and not intended as financial or investment advice.