California Targets Dormant Crypto With New Custody Proposal

California is pushing forward a legislative plan that could redefine how the state handles inactive crypto holdings.

A bill advancing through the legislature would treat idle assets on centralized exchanges as unclaimed property—potentially transferring custody to the state if left untouched for three years.

The measure, which cleared the State Assembly unanimously, updates existing rules applied to dormant bank and brokerage accounts. If passed, crypto held in exchange accounts with no activity—such as logins or transactions—would be preserved in its original form and managed by a licensed third party, rather than being liquidated into fiat.

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While the idea has stirred debate online, policy experts behind the bill argue it’s misunderstood. According to Eric Peterson from the Satoshi Action Fund, the law is intended to protect dormant crypto, not seize it—ensuring Bitcoin remains Bitcoin, rather than being sold off by custodians. Users would still be able to reclaim their assets from the state at any time.

The bill also includes provisions allowing residents and businesses to use digital currencies for payments, adding legal clarity for crypto-based transactions in the state. If approved by the Senate and signed into law, the new rules would come into effect in mid-2026, with licensing requirements for entities handling digital financial assets.

While some in the crypto space remain wary of increased state involvement, others see the proposal as a long-overdue modernization of property laws that could set a national precedent.

Alexander Stefanov

With over 8 years of experience in the cryptocurrency and blockchain industry, Alexander is a seasoned content creator and market analyst dedicated to making digital assets more accessible and understandable. He specializes in breaking down complex crypto trends, analyzing market movements, and producing insightful content aimed at educating both newcomers and seasoned investors. Alexander has built a reputation for delivering timely and accurate analysis, while keeping a close eye on regulatory developments, emerging technologies, and macroeconomic trends that shape the future of digital finance. His work is rooted in a passion for innovation and a firm belief that widespread education is key to accelerating global crypto adoption.