"Will 'Hoarding Coins for Three Years' Be Confiscated? The Truth About California's New Bill SB 822"

Original | Odaily Planet Daily (@OdailyChina)

Recently, discussions in the crypto community about “California officially seizing dormant account assets from exchanges” have intensified. Don’t panic; upon closer examination, you will find that this is actually a delayed fermentation of “old news.”

The bill known as SB 822 was signed by California Governor Newsom back in October 2025 and will officially take effect in 2026. Its essence is to replicate the “dormant account management system” (officially called the Unclaimed Property Law, or UPL Act) that has been in operation in the traditional banking system for decades into the crypto world.

However, there are many misunderstandings and panics in the community, with many people mistakenly believing that simply “holding coins without moving” will lead to confiscation. Odaily Planet Daily will clarify for readers in this article: Who does this bill apply to, and who does it not? Is the so-called “regulatory takeover” a pitfall or protection? As ordinary investors, how can we operate simply to securely retain our assets?

Core Mechanism: How does the three-year rule work when “HODL” becomes “missing”?

According to the provisions of the SB 822 bill, if a digital asset account has no “ownership actions” for three years, and communications sent by the exchange are returned or undeliverable, the asset will be considered “unclaimed” and trigger a transfer process.

This sounds frightening, as if simply being a long-term holder with “diamond hands” would lead to asset confiscation. But that is not the case; the bill defines “ownership actions” very broadly, which actually constitutes the first line of protection for active users.

Original text of SB 822

The so-called “ownership actions” refer not only to on-chain transfers or coin-to-coin transactions. According to the text of the bill, the following actions are considered proof that you still control the account and can directly interrupt the three-year countdown:

Logging into the account: Even if you just open the app to check your balance or log in once via the web, it counts as “electronic access,” sufficient to reset the timer.
One-time or recurring transactions: Whether buying, selling, or withdrawing fiat, even if an automatic deduction from a dollar-cost averaging plan you set up years ago executes once, it counts as active.
Cross-account activities: If you have multiple accounts on the same exchange (for example, a spot account and a financial account), as long as you have activity in one account, the other associated accounts will also be considered active.
Simple communication: Sending a customer service email or clicking a confirmation link in response to an inquiry email from the exchange counts as an “ownership action.”

This means that unless you completely go missing—neither logging in nor trading, and ignoring all emails and notifications—your assets will never be transferred without warning.

Will there be a warning before “confiscation”?

To prevent users from having their assets passively confiscated due to forgetfulness, the SB 822 bill establishes a clear mandatory notification procedure.

According to the regulations, exchanges, as asset holders, must send notifications to users 6 to 12 months before reporting the assets to the state government. This notification is not a regular user agreement update; it has strict legal format requirements, and the top of the notification must prominently state in bold: “California requires us to notify you that if you do not contact us, your unclaimed property may be transferred to the state government.”

Original text of SB 822

Additionally, the notification must include a form specified by the state controller's office. Users only need to fill out and return that form, or contact the exchange to confirm their identity via phone or online customer service, and the account's dormant status will be immediately lifted, resetting the so-called three-year countdown to zero.

The biggest misconception: Does being transferred equal being “liquidated”?

Before the implementation of SB 822, the community's biggest concern was that assets would be forcibly sold after being transferred, just like traditional securities. However, SB 822 explicitly prohibits immediate forced liquidation, making California the first state in the U.S. to legislate the “transfer of unclaimed crypto assets in their original form,” where “original form” includes the assets themselves and the associated private keys.

To achieve this, the bill even details the handling of “private keys.” If the exchange only holds part of the private keys (for example, in a multi-signature wallet), the bill requires them to attempt to obtain the remaining keys within 60 days; if they ultimately cannot obtain them, the exchange must continue to maintain the assets until they can be transferred, thus technically preventing asset loss.

Furthermore, once the assets enter the state regulatory account, they will enjoy a 18 to 20 months protection period. During this time, the state government typically will not sell the assets, and the original owner can still apply to retrieve the original amount of tokens. Only after the protection period ends does the state government have the right to liquidate them.

Who will safeguard the assets?

In response to the huge demand for digital asset custody, the SB 822 bill authorizes the state controller to select one or more “qualified custodians” to manage these assets. These custodians must hold a valid license issued by the California Department of Financial Protection and Innovation (DFPI) and must meet a series of strict standards, including:

Security level: Must have top-notch cybersecurity measures and private key management capabilities.
Compliance identity: Must qualify as a “financial institution” under the Bank Secrecy Act and bear anti-money laundering obligations.
Industry experience: Must have proven experience in handling digital assets (such as institutional service providers like Coinbase Custody or Anchorage Digital).

Are cold wallets affected?

In community discussions, many experienced players are most concerned about the question: Are my cold wallets, where I control the private keys, affected? Are my LP tokens in Uniswap affected?

The answer is clear: not affected.

The regulatory target of the bill is defined as “holders”, meaning third-party centralized institutions that have control over the assets. Since self-custody wallets are directly controlled by users who hold the private keys, there is no third party to report or transfer assets to the government. As long as the private keys are in your hands, the assets are outside the jurisdiction of this bill.

Moreover, the bill precisely delineates “digital financial assets,” explicitly excluding game virtual currencies, commercial reward points (such as airline miles), and tokens registered as securities with the SEC, avoiding regulatory generalization.

Practical Guide: How to reclaim transferred assets?

As mentioned earlier, even if assets have been transferred to the state government, the property rights of the original owner and their legal heirs do not disappear, and the right to file a claim with the California controller's office has no time limit. The specific outcome of the claim depends on the timing of the application: if applied before the assets are liquidated (i.e., within 18-20 months after government receipt), the owner can reclaim the original amount of cryptocurrency; if applied after liquidation, they can only reclaim the net cash proceeds from the asset sale.

It is important to be cautious, as with the implementation of the bill, there may be fraudulent intermediaries offering to assist with claims. The California controller's office official website (sco.ca.gov) is the only official channel for inquiries and claims, and this process does not charge any fees. Any request for an upfront fee to unfreeze assets carries a risk of fraud.

How to avoid custody risks?

The key to avoiding risks from SB 822 is to regularly break the silence of the account. Since the bill's trigger condition is “no activity for three consecutive years,” long-term holders only need to periodically perform simple ownership actions. For example, logging into the exchange account once a year, clicking to check the balance, or making a very small transaction. These actions will be recorded by the system as active, thus resetting the three-year countdown.

For users holding large amounts of assets, the most thorough solution is to withdraw assets to a non-custodial wallet. Once the assets leave the exchange and enter a cold wallet controlled by private keys, they no longer fall under the definition of “custodial assets” in the bill, thus fundamentally avoiding the jurisdiction of the unclaimed property law. This not only avoids policy-driven transfers but also defends against potential misappropriation or bankruptcy risks of the exchange (think of the lessons from FTX).

Additionally, there is often an overlooked aspect of estate planning. Many times, assets become “unclaimed” because the holder unexpectedly passes away, and family members are completely unaware of the existence of this digital wealth. SB 822 objectively provides an administrative safety net for these unexpectedly lost digital assets. Therefore, in the interest of family wealth responsibility, establishing a memorandum that includes the distribution of assets and properly informing family members ensures that in extreme situations, family members can retrieve and recover these digital inheritances through official channels.

Conclusion: The double-edged sword of compliance

The implementation of the SB 822 bill is undoubtedly another milestone in the process of mainstreaming crypto assets. It grants digital assets the same legal status as bank deposits and stocks, especially providing special privileges in preventing forced liquidation. This move also signifies that regulatory agencies are genuinely recognizing the unique attributes of crypto assets and striving to find a balance between protecting consumer rights and adapting to technological characteristics.

At first glance, the state government's actions may seem like “interfering,” but a deeper exploration of its underlying logic reveals a strong constraint on the power of third-party custody. Without a mature legal mechanism for property rights, those massive fortunes that have long been dormant due to forgetfulness, accidents, or user disappearance could ultimately become the “private property” of exchanges.

The SB 822 bill, through administrative safety nets, has built a permanent “lost and found” for digital assets, successfully bringing back personal wealth that could have vanished due to platform shutdowns under the protection of the law.

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