Unclaimed property: digital financial assets.

Senator Becker, with principal coauthor Assembly Member Valencia, anchors a major shift in California’s unclaimed property regime by treating digital financial assets as intangible property subject to escheatment, initiating a three-year dormancy period after which such assets may transfer to the State Controller for safekeeping and potential conversion to fiat currency. The core objective is to clarify that digital assets fall under the existing Unclaimed Property Law and to establish a structured process for notice, transfer, and eventual disposition or restitution to rightful owners.

Key mechanics center on notification and owner engagement. If a digital asset holder has any address indicating the owner is within the state, it must notify the apparent owner before escheatment, with notices sent by mail or electronic means depending on records and owner consent. Notices must occur 6 to 12 months before the asset becomes reportable to the Controller, and must include a distinctive header, disclosure of the escheat timeline and effects, and a form the owner can use to update their address and restart the escheat period if returned. An owner’s completion of the form, or a documented phone or electronic contact with the holder, restarts the escheat period; additional notice may be provided at any time before transfer.

The bill further delineates transfer, custody, and final disposition. Upon escheatment, digital financial assets may be transferred to the Controller, which may appoint one or more custodians licensed by the Department of Financial Protection and Innovation to manage and safeguard the assets, including handling private keys and ensuring transfer capability. The Controller may convert digital financial assets to fiat currency, with conversion to occur no sooner than 18 months and no later than 20 months after the initial report date. When claimed, a person may receive the exact digital asset or the net proceeds from any sale. The framework also requires procedures for timely transfers, provisions for partial private keys, and a pathway for sale of escheated property, including securities and other assets, with public notice prior to sale and distribution of proceeds to claimants.

Taken together, the provisions lay out a governance and operational architecture for digital assets that escheat to the state, balancing owner notification and opportunities for timely restitution with oversight, custody, and compliance requirements. The bill’s findings emphasize that digital financial assets are within the scope of intangible property under the Unclaimed Property Law, while the new custody and conversion provisions introduce licensed custodians, AML considerations, and reunification mechanisms designed to address the evolving landscape of digital asset ownership and transfer. The broader context situates digital assets within California’s established framework for unclaimed property, aligning administrative processes with contemporary financial technologies and specifying implementation steps for notification, transfer, sale, and restitution.