Imagine waking up one morning to discover your carefully held Bitcoin stash—untouched for years—is now under the custody of the State of California. It may sound dystopian, but it’s a scenario that’s inching closer to reality. Under Assembly Bill (AB) 1052, which recently passed the California State Assembly with unanimous support and is now being considered by the Senate, any cryptocurrency left inactive in a custodial account for three years could be labeled “unclaimed property” and transferred to state control. Is this an alarming case of government overreach, or a modern update to outdated property laws? Read on to explore the far-reaching implications of this controversial proposal.
California Bill Targets Dormant Crypto in Sweeping Property Law Update
In a bold move to modernize unclaimed property laws, California lawmakers have advanced AB 1052—a bill that would allow the state to seize dormant cryptocurrency assets held on centralized exchanges after three years of inactivity.
The legislation passed unanimously in the California State Assembly in June 2025 with a 78–0 vote and is now headed to the Senate for further review, where potential amendments may still be introduced before final approval.
Introduced by Democratic Assemblymember Avelino Valencia, the bill aims to bring digital assets like Bitcoin under the same regulatory umbrella as long-forgotten bank accounts, unclaimed paychecks, and tax refunds. If enacted, the law would require crypto holders to engage with their custodial exchange accounts at least once every three years to avoid having their assets classified as “unclaimed property” and subsequently seized by the state.
Can You Reclaim Seized Crypto? Here’s What the California Bill Says
A crucial question for any crypto owner facing California’s new unclaimed property law is: what happens to your digital assets once the state takes custody? The good news is, the legislation includes significant safeguards for crypto holders, ensuring that your assets aren’t simply liquidated or lost forever.
Crucially, any digital assets seized by the state will remain in their native cryptocurrency form; they will not be automatically converted to fiat currency. To manage these holdings, a designated, qualified custodian will be appointed to securely hold the digital assets on behalf of the state, ensuring their safekeeping.
Furthermore, original owners retain the unequivocal right to reclaim their cryptocurrencies at any point in time. The process requires owners to provide proper identification to recover their assets from the state’s designated custodian, offering a pathway to retrieve what’s rightfully theirs.
Perhaps the most significant clarification in the final version of the law pertains to its scope. While early drafts of AB 1052 contained provisions that could have impacted self-custody wallets, these sections were ultimately removed. This pivotal change means that users who store their crypto in cold wallets or personal hardware devices remain entirely unaffected by this law. The legislation now exclusively targets assets held by third-party custodial platforms and centralized exchanges, shifting the focus squarely onto entities that manage funds on behalf of others.
Privacy vs. Policy: Mixed Reactions to California’s Crypto Seizure Bill
AB 1052 has sparked a mixed response from the crypto industry, with opinions sharply divided over its intent and impact. Supporters argue that the bill establishes a reasonable framework for managing truly abandoned digital assets, noting that the state plans to preserve the seized cryptocurrencies in their original form rather than converting them to cash. This measure, they say, ensures that rightful owners can reclaim their assets at full value, even years later.
Critics, however, see the legislation as a troubling example of government overreach. Privacy advocates and crypto purists argue that the bill undermines the principles of decentralization and self-sovereignty that are core to the crypto movement. Some have raised concerns about the bill’s three-year inactivity threshold, warning that it could unfairly impact long-term holders—like early Bitcoin adopters—who might choose not to access their funds for extended periods.
Still, the bill’s exemption for self-custody wallets has earned some cautious approval. Individuals who hold their own private keys and store their crypto offline remain unaffected by the law, reinforcing the value of cold storage in preserving financial autonomy.
What’s Next for AB 1052?
After stirring both praise and concern across the crypto industry, AB 1052 is continuing its journey through the legislative process. While the bill has generated significant debate—from questions about state overreach to discussions around asset protection and self-custody—it’s important to note that the proposal has not yet become law.
Following its above-mentioned unanimous 78–0 approval in the California State Assembly last month, the bill is now under review in the California Senate. Lawmakers there may propose amendments before it proceeds to Governor Gavin Newsom’s desk for potential signing.
If passed and signed into law, the bill is expected to take effect after July 1, 2026, with specific timelines tied to licensing requirements and the state’s authority to classify dormant crypto as unclaimed property. Until then, the debate over digital asset rights, regulatory boundaries, and long-term crypto storage is likely to intensify both in California and beyond.
Source: Coin Central