Introduction: Recently, discussions around California’s new law regarding the seizure of dormant crypto assets have sparked widespread attention within the crypto community. The newly passed SB 822 law introduces measures for managing dormant crypto asset accounts. However, it does not arbitrarily confiscate assets, but instead, it regulates the process for handling inactive accounts. This article will provide a detailed explanation of the core mechanisms of SB 822, its scope, and how investors can protect their assets from being affected by this law.
TL;DR:
- Background of the Law: SB 822 is a new regulation introduced by California to manage “dormant accounts” in crypto assets, akin to the traditional “unclaimed property” laws in banking.
- Regulated Entities: This law mainly applies to accounts that have been inactive for three years in centralized exchanges. Self-custody wallets and on-chain assets are unaffected.
- Mandatory Notification: Exchanges must notify users before transferring assets, giving them ample time to recover their accounts.
- Asset Protection Period: After asset transfer, there will be an 18-20 month protection period, during which no liquidation occurs.
- Clarifying Misconceptions: Asset transfer does not mean forced liquidation; the transferred assets are kept intact and protected.
- How to Protect Your Assets: Regularly logging into accounts or transferring assets to self-custody wallets can help avoid the impact of this law.
1. Background of California’s SB 822 Law
With the widespread adoption of cryptocurrency, California formally signed SB 822 into law in 2025 to regulate dormant crypto accounts. Essentially, the law introduces the same “unclaimed property” regulations traditionally used by the banking system into the cryptocurrency space. Through this law, the California government aims to address the issue of untraceable accounts on crypto platforms that remain inactive for extended periods, ensuring that assets are properly managed.
Key Question: Can assets in dormant accounts be “confiscated”? Answer: No, assets will not be arbitrarily seized. The law enforces a strict notification and procedural process for asset transfer.
2. Core Mechanism of SB 822
According to SB 822, if a crypto account has been inactive for three years and the owner cannot be reached through notifications, the account’s assets will be considered “unclaimed” and could be transferred to the state government.
The key “ownership actions” that can prevent this include:
- Account Login: Even a simple balance check or logging into the account is considered “electronic access.”
- Transactions: Any trade, transfer, or fiat deposit/withdrawal counts as an active action.
- Cross-Account Activities: Activities between different accounts within the same exchange will reset the inactivity clock.
- Communication with Support: Responding to emails or confirming notification links is also considered an active action.
As long as you perform any of the above actions within three years, the inactivity countdown will be reset.
3. Mandatory Notification Before Asset Transfe
To prevent assets from being transferred due to negligence, SB 822 mandates that exchanges must send a formal notification to users 6 to 12 months before transferring assets. The notification must prominently state:
“California requires us to notify you that if you do not contact us, your unclaimed property may be transferred to the state government.”
This notification is not a typical update to the user agreement but a legally binding communication with explicit legal consequences. If users respond on time, the dormant status will be lifted, and the assets will not be transferred.
4. The Biggest Misconception
Many crypto investors worry that once assets are transferred to the state government, they may be liquidated like traditional securities. In fact, SB 822 explicitly prohibits immediate forced liquidation after asset transfer.
California is the first state to legislate that “unclaimed crypto assets will be transferred intact,” meaning that both the assets and their private keys will be kept secure. During the 18-20 month protection period, the state will not liquidate the assets, and the original owner can reclaim them at any time. Only after the protection period expires will the government have the right to liquidate the assets.
5. Cold Wallets and Self-Custody Assets: Exempt from SB 822
The law applies only to “holders”—that is, third-party entities like exchanges. Therefore, self-custody wallets and on-chain assets are outside the scope of this law.
If you store your assets in a cold wallet where you control the private keys, those assets are completely unaffected by SB 822 and are not subject to unclaimed property rules. Exchanges cannot intervene or report these assets to the government.
6. How to Reclaim Transferred Assets?
Even if assets have been transferred to the state government, the original owner still has the right to reclaim them. The process for reclaiming assets is as follows:
- During the 18-20 month protection period: The original owner can directly request asset return from the California State Controller’s Office.
- After the protection period: Only the net cash proceeds from asset liquidation can be reclaimed, not the original crypto assets.
It’s important to note that the claim process is free of charge. The only official channel for claims is the California State Controller’s Office website. Any request for upfront payment to reclaim assets should be treated as a potential scam.
7. How to Avoid the Risks of SB 822?
To prevent triggering the provisions of SB 822, investors can take the following actions:
- Log into Accounts Regularly: Log in periodically to check balances or make small transactions to ensure the account stays active.
- Transfer Assets to Self-Custody Wallets: Move assets to cold wallets where you control the private keys, avoiding third-party oversight.
- Estate Planning: Create an asset inventory and inform family members so that in case of emergencies, they can reclaim assets through official channels.
8. Conclusion: The Double-Edged Sword of Compliance
The implementation of SB 822 marks a significant step towards the regulation and maturation of the cryptocurrency market. This law not only helps to standardize the management of digital assets but also provides a protective mechanism for investors, preventing assets from being lost or seized due to negligence.
While the enforcement of this law may introduce some compliance costs, in the long term, it ensures greater transparency, legitimacy, and stability in crypto space. Investors should remain vigilant about the status of their accounts and take the necessary precautions to protect their assets from being lost due to mismanagement or inaction.
Ultimately, SB 822 provides robust legal support for the healthy development of the cryptocurrency industry while establishing a clearer legal framework for the security and protection of digital assets.
Disclaimer: This content is for educational and reference purposes only and does not constitute any investment advice. Digital asset investments carry high risk. Please evaluate carefully and assume full responsibility for your own decisions.