
Main Points :
- California’s AB 1052 (and SB 822) prevents automatic liquidation of dormant cryptocurrencies, instead mandating custody until the rightful owner claims them
- After three years of inactivity on centralized platforms, digital assets may be transferred to a state-designated custodian under “unclaimed property” rules
- The law requires custodians to preserve assets in their native crypto form, not forcibly convert them to fiat currency
- Custodians and state authorities will carry obligations around licensing, standards, and owner notification
- Other U.S. states (e.g. Arizona) are updating unclaimed property law to explicitly include crypto, indicating a broader trend
- For practitioners, the new legal landscape may push behavior toward self-custody, stronger monitoring of dormant assets, and compliance burdens for custodial platforms
- Strategic investment and token design may adapt to regulatory shifts (e.g. dormancy-activating mechanisms, staking, interoperability)
1. Background: Dormant Accounts, Unclaimed Property, and Crypto
Unclaimed property laws in the U.S. historically allow states to take control of financial assets that appear abandoned after a period of inactivity—such as bank accounts, safe deposit boxes, or uncashed checks. California’s new AB 1052 extends that vision into the digital-asset realm.
Under AB 1052, cryptocurrency holdings—including Bitcoin (BTC), Ethereum (ETH), and other digital assets—held by custodial or exchange platforms become subject to unclaimed property rules if the account exhibits dormancy (i.e. no “act of ownership interest”) for three years.
Historically, in many states, dormant accounts would lead to forced liquidation: platform would convert assets to fiat, transfer the proceeds to the state, and the original owner, if later claiming them, would receive only the cash value at the time of liquidation (thus losing out on subsequent price appreciation).
California’s new approach diverges from that model: the law mandates that digital assets must be preserved in their native form rather than forcibly liquidated (if possible), giving the owner potential upside if the asset appreciates during the dormant period.
Moreover, AB 1052 also regulates digital payments: it allows certain government entities to accept digital assets, restricts public entities from imposing hardware restrictions, and sets licensing requirements for digital-asset business activity beginning July 1, 2026.
SB 822 works alongside AB 1052 to clarify that dormant crypto assets sent to the state should maintain their token form and not be automatically liquidated.
2. How AB 1052 Works in Practice: Dormancy, Custody, and Reclamation

2.1 Defining Dormancy and “Act of Ownership Interest”
A key mechanism in AB 1052 is defining when an account is “dormant.” The bill states that dormancy begins when either (a) communications to the owner are returned undeliverable, or (b) the owner hasn’t performed a recognized act of ownership interest, such as depositing, withdrawing, logging in, or other transactions.
If the owner later conducts an eligible act, the dormancy clock resets immediately.
After three years of uninterrupted dormancy, the platform must transfer the digital assets to a state-appointed custodian (i.e. the state’s unclaimed property apparatus) rather than liquidating them.
2.2 Custodial Obligations and Licensing
Under AB 1052, entities engaging in digital-asset business (e.g. exchanges, custodians) must be licensed by California’s Department of Financial Protection and Innovation starting July 1, 2026 (unless exempt).
These licensed custodians must follow state standards to protect and secure dormant assets. The state’s auditor has authority to appoint one or more custodians to oversee unclaimed digital assets.
If no owner emerges after 18 to 20 months following notification, the auditor may liquidate the assets (convert to fiat) under state rules.
2.3 Owner Reclamation
The original owner retains the right to reclaim their assets (in their original crypto form) from state custody by following the claims process.
Because the assets are preserved as tokens, if crypto prices have increased during dormancy, the claimant may benefit from the full upside (less administrative costs).
This approach addresses a frequent criticism of historic unclaimed property regimes: namely, that owners lose value if assets are liquidated early.
3. Reactions, Critiques, and Industry Impacts
3.1 Support and Industry Backing
Custodial firms such as Coinbase welcomed California’s move. Coinbase’s Chief Legal Officer, Paul Grewal, publicly thanked Governor Newsom for signing SB 822 and argued that California should join other states in protecting staking rights and crypto holdings.
By treating dormant crypto as an asset class worthy of protection, California signals a recognition of crypto’s unique properties, potentially encouraging the development of better custody infrastructure.
3.2 Criticism and Concerns
Some privacy advocates and critics warn that the state’s claim over dormant accounts, even if temporary, undermines crypto’s core principle of individual control.
There is concern about the legal clarity around how to notify owners, how to define dormancy precisely, and how to handle cross-jurisdictional problems (e.g. if a user resides outside California, but holds assets via an exchange registered there).
Critics also caution that state-level claims over crypto may introduce complexity for cross-border platforms and stakeholders, especially for users who manage assets globally.
In addition, there are administrative burdens on custodial platforms to detect dormancy, notify users, track cryptographic ownership, and manage transitions to state custody.
3.3 Broader Legislative Trends and Responses in Other States

California is not acting in isolation. As of 2025, over 40 U.S. states are considering or enacting legislation around digital assets and token regulation.
- Arizona: Passed House Bill 2749, explicitly revising its unclaimed property statutes to include digital assets. The law also established a Bitcoin and Digital Assets Reserve Fund and mandates that dormant digital assets be remitted (or liquidated) after three years.
- North Dakota: Began formally recognizing virtual currency as reportable property in 2025.
- Several states (e.g. Utah, Nebraska, South Dakota) updated their Uniform Commercial Code or related statutes to consider digital assets in 2025.
This wave suggests that dormant-crypto regulation and unclaimed property modernization is becoming a core regulatory frontier in the U.S.
4. Implications for Crypto Investors, Developers, and Platforms

4.1 Shift Toward Self-Custody and Active Management
Given the risk of state custody for dormant assets, investors may increasingly choose self-custody (cold wallets, hardware wallets) over leaving assets on exchanges. That reduces exposure to custodial risk, but increases the responsibility of proper key management.
Developers and wallet providers may implement features to help users “prove activity” (e.g. periodic micro-transactions, automated “heartbeat” transactions) to reset dormancy clocks. Token designs might embed dormant-period checks or auto-triggered safe actions to maintain alive status.
4.2 Custodial Platforms’ Compliance Overhead
Exchanges and custodians operating in California (or having California users) must instrument systems to monitor account dormancy, handle notification, migrate assets to state custody, and support owner reclamation. They may also need licensing by July 2026.
This introduces compliance cost, system complexity, legal risk, and potential disputes over what constitutes an act of ownership interest. Cross-jurisdictional infrastructure will need to consider mapping user residence, multiple states’ laws, and international users.
4.3 Token Design, Incentives, and Economic Models
Project developers may need to account for dormancy rules in staking protocols, token lockups, airdrops, or governance systems. For instance, protocols might design periodic auto-exercises or incentive nudges to reduce dormancy risk.
From an investor’s perspective, dormant or long-term holding strategies may need a plan to “wake up” holdings before the three-year threshold.
4.4 New Opportunities in Custodial Services, Claims Infrastructure, and Recovery
A new niche is emerging in specialized custodial services compliant with state unclaimed property standards, or services that assist users in reclaiming dormant assets. Legal-tech firms may build claims-management systems, notifications, and cryptographic proofs to support rightful owners.
Projects enabling cross-platform recovery or automated dormancy alerts could find demand. Additionally, states may begin to act as de facto institutional holders of dormant crypto, raising questions about how such state-held pools might be leveraged over time (in staking, lending, or reserve strategies).
5. Looking Forward: Challenges, Risks, and Strategic Takeaways
While California’s AB 1052 is ground-breaking, its implementation will test the legal boundaries of property rights, the interplay between private cryptographic ownership and public claims, and cross-jurisdictional tensions.
Key challenges include:
- Precisely defining and enforcing dormancy across multiple platforms and jurisdictions
- Ensuring fair notice to owners and robust reclamation processes
- Handling the complexity of custodial vs non-custodial accounts
- Addressing conflicts when users move, change platforms, or use international services
- Navigating regulatory overlap (state vs federal laws on securities, commodities, consumer protection)
For crypto stakeholders—developers, custodians, and investors—the shift demands greater attention to dormant-asset risk, investment in compliance systems, and strategic adaptation (e.g. self-custody, “wake-up” incentives).
Conclusion
California has ushered in a new era of crypto regulation with AB 1052 (and SB 822), which transforms how dormant cryptocurrency is treated under unclaimed property laws: rather than being forcibly liquidated, dormant crypto will now be preserved in token form under state custody until reclaimed by the rightful owner. This landmark change obliges custodians to adopt compliance, licensing, and monitoring mechanisms.
The broader trend is unmistakable: states are racing to integrate digital assets into traditional regulatory frameworks. For those seeking new crypto opportunities or designing blockchain systems, the message is clear: dormancy risk matters. Asset designers, custody providers, and investors alike must incorporate “activity maintenance” strategies, consider self-custody, and build infrastructure for claim and recovery.
As the legal landscape evolves, projects and platforms that anticipate and mitigate dormant-asset risk may gain competitive advantage. In a world where tokens can be claimed by the state after three years of silence, staying active—even with minimal transactions—might be the smart move to protect long-term value.