The California State Assembly has passed a new law under its ‘Unclaimed Property’ law, which will allow the state to seize any digital assets kept in crypto wallets or exchanges that have been inactive for three years. When presented to the State Assembly, the bill, AB 1052, got a 78-0 vote and has now been passed to the Senate, where it will undergo further review before being passed into law.
The bill requires that owners of digital assets and cryptocurrency use their wallets at least once in three years if they do not want to risk losing their assets. The bill primarily focuses on custodial and exchange wallets, meaning that owners who use a cold wallet or an anonymous no KYC wallet that provides users with increased privacy as they transact digital assets, might be exempted. Although the bill states that users would lose their assets, it does not give the state the power to liquidate them. Instead, these assets will be transferred to the state and will be returned to their owners once they can verify ownership.
Lawmakers argue that the bill will put unclaimed digital assets under the same law that covers inactive bank accounts and unclaimed insurance payouts. There are also worries that it will invade the privacy that comes with owning cryptocurrencies. This move will affect long-term investors since they use crypto wallets to keep their assets for a period, often years, for capital appreciation and dividends in some cases. This bill, if passed, is likely to discourage long-term investment strategies.
Opponents of bill AB 1052 argue that it renders the idea of digital sovereignty ineffective. The argument is that telling users to interact with their wallets so they won’t lose their assets is synonymous with coercion. Others also believe it is a form of surveillance by design. However, supporters of the bill see it differently. They claim that the bill will reduce the chaos associated with the crypto industry by providing structure. They also believe that instead of losing inactive assets to isolated ledgers, the bill can help the government protect these assets.
There is also the argument that these rules already exist in some states in the U.S, and by mandating these exchange wallets to transfer the assets to the state in their original form rather than converting or liquidating them, the owners can still gain if the assets appreciate in value by the time they reclaim them.
If the bill goes through, it would make all private transactions involving digital assets legal and prevent restrictions from local authorities and agencies. It would also make California the first state in the U.S. to incorporate inactive crypto assets with Unclaimed Property laws. The fate of the bill, however, depends on the discussions that take place in the Senate. There’s a feeling that the Senate may pass it into law, as the State Assembly didn’t have issues when reviewing it.
While the debate on the bill is still ongoing, the Assembly has also passed AB 1180 with a 68-0 vote. The bill could make it possible for the state to begin accepting Bitcoin and altcoins for public transactions or official payments. It is set to expand California’s regulation of digital assets. It states that the California Department of Financial Protection and Innovation (DFPI) would be responsible for all cryptocurrency transactions in California, and by 2028, the DFPI will oversee any crypto-related activity including creating and implementing consumer protection measures, providing licenses for businesses and other activities that falls under the Digital Financial Asset Law (DFAL).
