(1)The Unclaimed Property Law (UPL) prescribes the circumstances under which intangible property, including digital financial assets, escheats to the state, including how and when apparent owners must be notified that their property is at risk of escheating and the manner in which escheated property must be delivered to the State Controller. Existing law also requires that business associations holding a financial asset that is potentially subject to escheatment provide notice to the owners of that asset as specified.

This bill would establish mechanisms for the management of digital financial assets, as defined, that escheat to the state. The bill would create the Digital Asset Claims Reserve Account and the Digital Asset Reserve Fund for these purposes. The bill would require the Controller to hold an escheated digital financial asset in its native form no earlier than 18 months and no later than 20 months after it is reported to the Controller by the holder of the asset, and, if it is not claimed by the owner within that time, to liquidate the asset and deposit the net proceeds in the Digital Asset Claims Reserve Account. The bill would require the Treasurer to invest moneys in the Digital Asset Claims Reserve Account pursuant to the Treasurers existing authority to invest surplus money. The bill would require the Controller to transfer all interest, earnings, and investment income credited to the Digital Asset Claims Reserve Account to the Digital Asset Reserve Fund on a quarterly basis. The bill would create the Digital Asset Reserve Board, which would be assigned specified tasks relating to administration of the Digital Asset Reserve Fund, including establishing investment policies to be followed by the Controller when investing moneys in the fund by converting them into high-quality digital assets. The bill would authorize the Controller to take specified actions related to digital financial assets and would require the Controller to publish a quarterly report, as specified. Under the bill, a person who makes a valid claim before the disposition of the digital financial assets is entitled to receive the digital financial assets in their native form or in fiat currency, as specified, or in cash if the digital financial assets were liquidated. The bill would authorize the Controller to use assets within the Digital Asset Reserve Fund to pay for the administration and management of the fund, thereby making an appropriation.

(2)Under existing law, a person holding funds or other property escheated to the state must file a report with the Controller and pay or deliver the escheated property to the Controller within a specified time, unless another person establishes their right to the property. Existing law requires any payment to the Controller of at least $2,000 in unclaimed cash to be made by electronic funds transfer.

The bill would permit the Controller to direct the holder of a digital financial asset to sell or to otherwise liquidate the digital financial asset and deliver the net proceeds in lieu of the native digital financial asset, as specified. The bill would require a holder of funds or other property escheated to the state that is directed to sell or liquidate the digital financial asset to do so for no less than the prevailing market price of the digital financial asset at the time of sale.

(1)The Unclaimed Property Law (UPL) prescribes the circumstances under which intangible property, including digital financial assets, escheats to the state, including how and when apparent owners must be notified that their property is at risk of escheating and the manner in which escheated property must be delivered to the State Controller. Existing law also requires that business associations holding a financial asset that is potentially subject to escheatment provide notice to the owners of that asset as specified.

The Unclaimed Property Law (UPL) prescribes the circumstances under which intangible property, including digital financial assets, escheats to the state, including how and when apparent owners must be notified that their property is at risk of escheating and the manner in which escheated property must be delivered to the State Controller. Existing law also requires that business associations holding a financial asset that is potentially subject to escheatment provide notice to the owners of that asset as specified.

The bill would create the Digital Asset Reserve Fund into which digital financial assets shall be deposited, as specified. This bill would require the Controller to convert digital financial assets escheated to the state into high-quality digital assets, as specified. The bill would require the notice provided by holders of digital assets to include a notification that, if escheated, the assets will be put into the Digital Asset Reserve Fund and will be converted into high-quality assets after the requisite holding period, as specified. The bill would create a Digital Asset Reserve Board assigned specified tasks relating to administration of the fund. The bill would authorize the Controller to take specified actions related to digital financial assets and would require the Controller to publish a quarterly report, as specified. The bill would require the Controllers conversion of digital financial assets escheated to the state into high-quality digital assets to occur not sooner than 18 months, but not later than 20 months, after the date the escheated property is reported to the Controller by the holder of the property. Under the bill, a person who makes a valid claim before the conversion by the Controller is entitled to receive the digital financial assets in their native form or in fiat currency, as specified. This bill would authorize the Controller to engage qualified staking services providers to stake digital financial assets escheated to the Digital Asset Reserve Fund, as specified. This bill would allocate any staking rewards derived from the staking of digital financial assets to the Digital Asset Reserve Fund as the property of the fund. This bill would authorize the Controller to use assets within the Digital Asset Reserve Fund to pay for the administration and management of the fund, thereby making an appropriation.

The Unclaimed Property Law (UPL) prescribes the circumstances under which intangible property, including digital financial assets, escheats to the state, including how and when apparent owners must be notified that their property is at risk of escheating and the manner in which escheated property must be delivered to the State Controller. Existing law also requires that business associations holding a financial asset that is potentially subject to escheatment provide notice to the owners of that asset as specified.

The bill would create the Digital Asset Reserve Fund into which digital financial assets shall be deposited, as specified. This bill would require the Controller to convert digital financial assets escheated to the state into high-quality digital assets, as specified. The bill would require the notice provided by holders of digital assets to include a notification that, if escheated, the assets will be put into the Digital Asset Reserve Fund and will be converted into high-quality assets after the requisite holding period, as specified. The bill would create a Digital Asset Reserve Board assigned specified tasks relating to administration of the fund. The bill would authorize the Controller to take specified actions related to digital financial assets and would require the Controller to publish a quarterly report, as specified. The bill would require the Controllers conversion of digital financial assets escheated to the state into high-quality digital assets to occur not sooner than 18 months, but not later than 20 months, after the date the escheated property is reported to the Controller by the holder of the property. Under the bill, a person who makes a valid claim before the conversion by the Controller is entitled to receive the digital financial assets in their native form or in fiat currency, as specified. This bill would authorize the Controller to engage qualified staking services providers to stake digital financial assets escheated to the Digital Asset Reserve Fund, as specified. This bill would allocate any staking rewards derived from the staking of digital financial assets to the Digital Asset Reserve Fund as the property of the fund. This bill would authorize the Controller to use assets within the Digital Asset Reserve Fund to pay for the administration and management of the fund, thereby making an appropriation.

The Unclaimed Property Law (UPL) prescribes the circumstances under which intangible property, including digital financial assets, escheats to the state, including how and when apparent owners must be notified that their property is at risk of escheating and the manner in which escheated property must be delivered to the State Controller. Existing law also requires that business associations holding a financial asset that is potentially subject to escheatment provide notice to the owners of that asset as specified.

The bill would create the Digital Asset Reserve Fund into which digital financial assets shall be deposited, as specified. This bill would require the Controller to convert digital financial assets escheated to the state into high-quality digital assets, as specified. The bill would require the notice provided by holders of digital assets to include a notification that, if escheated, the assets will be put into the Digital Asset Reserve Fund. Fund and will be converted into high-quality assets after the requisite holding period, as specified. The bill would create a Digital Asset Reserve Board assigned specified tasks relating to administration of the fund. The bill would authorize the Controller to take specified actions related to digital financial assets and would require the Controller to publish a quarterly report, as specified. The bill would require the Controllers conversion of digital financial assets escheated to the state into high-quality digital assets to occur not sooner than 18 months, but not later than 20 months, after the date the escheated property is reported to the Controller by the holder of the property. Under the bill, a person who makes a valid claim before the conversion by the Controller is entitled to receive the digital financial assets in their native form or in fiat currency, as specified. This bill would authorize the Controller to use assets within the Digital Asset Reserve Fund to pay for the administration and management of the fund, thereby making an appropriation.

The Unclaimed Property Law (UPL) prescribes the circumstances under which intangible property, including digital financial assets, escheats to the state, including how and when apparent owners must be notified that their property is at risk of escheating and the manner in which escheated property must be delivered to the State Controller. Existing law also requires that business associations holding a financial asset that is potentially subject to escheatment provide notice to the owners of that asset as specified.

The bill would create the Digital Asset Reserve Fund into which digital financial assets shall be deposited, as specified. This bill would require the Controller to convert digital financial assets escheated to the state into high-quality digital assets, as specified. The bill would require the notice provided by holders of digital assets to include a notification that, if escheated, the assets will be put into the Digital Asset Reserve Fund. The bill would create a Digital Asset Reserve Board assigned specified tasks relating to administration of the fund. The bill would authorize the Controller to take specified actions related to digital financial assets and would require the Controller to publish a quarterly report, as specified. This bill would authorize the Controller to use assets within the Digital Asset Reserve Fund to pay for the administration and management of the fund, thereby making an appropriation.

SENATE COMMITTEE ON

Senator Sabrina Cervantes, Chair

2025 - 2026 Regular Session

AB 2335 (Valencia) - Unclaimed property: digital financial assets

Bill Summary:

AB 2335 would create the Digital Asset Reserve Fund for the deposit of digital financial assets (DFAs) escheated to the state under the Unclaimed Property Law (UPL) and requires the State Controller’s Office (SCO) to convert those DFAs into high quality digital assets. The bill would create a seven member Digital Asset Reserve Fund Board (DARF) to create guidelines for valuing assets in the DARF and establish investment policies, including risk management policies for staking.

Fiscal Impact:

Estimated $678,000 annually to the SCO to support information security needs related to DFA conversion and staking and the work of the DARF Board (Unclaimed Property Fund (UPF)). Annual costs of approximately $250,000 to $750,000 to the SCO to contract with a firm to trade DFAs on the SCO’s behalf (UPF).

Major revenue losses, potentially in the tens of millions or more annually by changing the handling of DFAs from a stable holding and investment process to a high risk process (General Fund).

The FY 2026-27 Budget appropriated $4.2 million and 18 positions to the SCO to implement SB 822 (Becker), Chapter 660, Statutes of 2025, which included DFAs in the UPL program. That funding is still needed before consideration of the additional workload envisioned by this bill. 

Background:

The UPL provides for the “escheat” of unclaimed personal property to the state, which is the reversion of property to the state due to the failure of the owner of the property to inherit or claim the property. When property escheats to the state, the state assumes custody of the property in perpetuity, unless and until the owner claims the property. The state’s custody has two purposes: by assuming custody of unclaimed property, the state can protect the owner’s interests and custody of unclaimed property allows the state to benefit from the use of the unclaimed property until the rightful owner comes along.

The UPL establishes procedures to be followed when property goes unclaimed, generally for a period of three years, and custody reverts to the state. The holder must file an annual report on unclaimed property and turn the property over to the Controller at the time the report is filed. Assuming the Controller does not decline to take custody of the property, the holder then must transfer the property to the Controller within a specified time. The Controller then holds the property or sells it and holds the proceeds in perpetuity, unless and until the rightful owner makes a claim for its return. The Controller retains the interest or other income on property or moneys that accrue after the state takes custody of the property.

A digital financial asset is “a digital representation of value that is used as a medium of exchange, unit of account, or store of value, and that is not legal tender,” with exceptions for affinity and rewards programs, representations of value in video games, and assets regulated by the United States Securities and Exchange Commission. The most common type of digital financial asset is cryptocurrency—Bitcoin, Ethereum, Tether. Cryptocurrency and other digital financial assets have no tangible form, so unlike U.S. dollars, which can be held electronically or physically, they are necessarily bought, sold, held, and traded electronically.

Proposed Law:

The bill would create the Digital Asset Claims Reserve Account and the Digital Asset Reserve Fund for these purposes.

The bill would require the Controller to hold an escheated digital financial asset in its native form no earlier than 18 months and no later than 20 months after it is reported to the Controller by the holder of the asset, and, if it is not claimed by the owner within that time, to liquidate the asset and deposit the net proceeds in the Digital Asset Claims Reserve Account.

The bill would require the Treasurer to invest moneys in the Digital Asset Claims Reserve Account pursuant to the Treasurer’s existing authority to invest surplus money.

The bill would require the Controller to transfer all interest, earnings, and investment income credited to the Digital Asset Claims Reserve Account to the Digital Asset Reserve Fund on a quarterly basis.

The bill would create the Digital Asset Reserve Board, which would be assigned specified tasks relating to administration of the Digital Asset Reserve Fund, including establishing investment policies to be followed by the Controller when investing moneys in the fund by converting them into high-quality digital assets.

The bill would authorize the Controller to take specified actions related to digital financial assets and would require the Controller to publish a quarterly report, as specified. Under the bill, a person who makes a valid claim before the disposition of the digital financial assets is entitled to receive the digital financial assets in their native form or in fiat currency, as specified, or in cash if the digital financial assets were liquidated.

The bill would authorize the Controller to use assets within the Digital Asset Reserve Fund to pay for the administration and management of the fund, thereby making an appropriation.

This bill would establish the Digital Asset Reserve Fund Board to create guidelines for valuing assets in the Digital Asset Reserve Fund and establish prudent investment policies relating to the investment objectives of and asset allocation of the Digital Asset Reserve Fund.

Related Legislation:

SB 822 (Becker) Chapter 660/2025 amended the Unclaimed Property Law to provide when and how digital financial assets, as defined, escheat to the state.

AB 1052 (Valencia), 2025 would have established an alternative process for the escheat of digital financial assets to the Controller under the UPL than the one adopted in SB 822. AB 1052 was held under submission in this committee.

AB 1180 (Valencia) 2025 would have required the Department of Financial Protection and Innovation to adopt regulations to allow a payment for license or other fees required under the Digital Financial Assets Law to be made with a stablecoin, as specified. AB 1180 also requires the Treasurer and the Controller to submit a report to the Legislature on recommendations for payments under other laws and to other state governmental agencies using stablecoins. AB 1180 was held under submission in this committee.

Staff Comments:

It is unclear what if anything is amiss with the state’s fully funded current process, operating for less than two years, with no documented revenue losses, that would require the state to reject that process and adopt a far financially risky process.

SENATE JUDICIARY COMMITTEE

Senator Thomas Umberg, Chair

2025-2026 Regular Session

Bill No: AB 2335 (Author:Valencia)

Version: June 22, 2026

Hearing Date: June 30, 2026

Fiscal: Yes

Urgency: No

Consultant: AWM

SUBJECT

Unclaimed property: digital financial assets

DIGEST

This bill establishes the Digital Financial Asset Fund, through which the Controller would be required to invest in digital financial assets using the interest earned on liquidated digital financial assets held by the state under the Unclaimed Property Law (UPL).

EXECUTIVE SUMMARY

The UPL provides for the “escheat” of unclaimed personal property to the state, which is the reversion of property to the state due to the failure of the owner of the property to inherit or claim the property. When property escheats to the state, the state assumes custody of the property in perpetuity, unless and until the owner claims the property. The UPL also sets forth how a holder of unclaimed property must transfer unclaimed property to the state, how the Controller must provide notice of the unclaimed property to its apparent owner, and how a rightful owner may apply to receive their property (or the monetary value thereof) after it has been transferred to the state.

Under the UPL, digital financial assets (e.g., cryptocurrencies) escheat to the state after they have gone unclaimed for three years. The Controller is required to convert digital financial assets to fiat currency within 18 to 20 months; an owner who claims their property before the conversion will get their original assets back, but after the conversion, they will receive the monetary value of the assets at the time of the sale.

This bill would create a Digital Financial Asset Fund, through which the Controller would be required to invest in digital financial assets. The bill requires the proceeds from escheated liquidated digital financial assets to be placed in a Digital Asset Claims Reserve Account. Rightful owners will be paid out from that account, but in the meantime, interest earned on the Digital Asset Claims Reserve Account will be deposited in the Digital Asset Reserve Fund. The Controller must use those moneys to buy “high quality” digital financial assets, as defined, and consistent with the priorities of the Digital Financial Asset Reserve Board, also created by this bill. The bill also modifies provisions of the UCL related to the notification of owners prior to escheatment and the Controller’s sale of escheated digital financial assets. The author has agreed to amend the bill to permit, rather than require, the Controller to purchase digital financial assets for the Digital Asset Reserve Fund.

This bill is sponsored by the author and is supported by the California Blockchain Advocacy Coalition. The Committee has not received timely opposition to this bill.

PROPOSED CHANGES TO THE LAW

Existing law:

1. Establishes the UPL, which establishes when and how intangible property escheats to the state for the state to take custody of, but not own, unclaimed property. (Code Civ. Proc., pt. 3, tit. 10, ch. 7, §§ 1500 et seq.)
2. Provides that property received by the state pursuant to the UPL shall not permanently escheat to the state, and that it is the intent of the Legislature that property owners be reunited with their property. (Code Civ. Proc., § 1501.5.)
3. Defines the following relevant terms:
   1. “Unclaimed property,” unless specifically qualified, means all property (1) which is unclaimed, abandoned, escheated, permanently escheated, or distributed to the state, or (2) which, under any provision of law, will become unclaimed, abandoned, escheated, permanently escheated, or distributed to the state, or (3) to the possession of which the state will become entitled, if not claimed by the person or persons entitled thereto within the time allowed by law, whether or not there has been a judicial determination that such property is unclaimed, abandoned, escheated, permanently escheated, or distributed to the state. (Code Civ. Proc., § 1300(b).)
   2. “Escheat,” unless specifically qualified, means the vesting in the state of title to property the whereabouts of whose owner is unknown or which a known owner has refused to accept, whether by judicial determination or by operation of law, subject to the right of claimants to appear and claim the escheated property or any portion thereof. (Code Civ. Proc., § 1300(c).)
   3. “Apparent owner” means the person who appears from the records of the holder to be entitled to property held by the holder. (Code Civ. Proc., § 1501(a).)
   4. “Business organization” means any private corporation, joint stock company, business trust, partnership, or any association for business purposes of two or more individuals, whether or not for profit, including, but not by way of limitation, a banking organization, financial organization, life insurance corporation, or utility. (Code Civ. Proc., § 1501(c).)
   5. “Digital financial asset” means a digital representation of value that is used as a medium of exchange, unit of account, or store of value, and that is not legal tender, whether or not denominated in legal tender, and does not include specified grants within an affinity rewards program or game platform or securities registered with the United States Securities and Exchange Commission. (Code Civ. Proc., § 1501(d); Fin. Code, § 3102(g).)
   6. “Holder” means any person in possession of property subject to the UPL belonging to another, or who is a trustee in case of a trust, or who is indebted to another on an obligation subject to the UPL. (Code Civ. Proc., § 1501(g).)
   7. “Owner” means a depositor in case of a deposit, a beneficiary in case of a trust, or a creditor, claimant, or payee in case of any other choses in action, or any person having a legal or equitable interest in property subject to the UPL, or their legal representative. (Code Civ. Proc., § 1501(i).)
   8. “Person” means any individual, business association, government or governmental subdivision or agency, two or more persons having a joint or common interest, or any other legal or commercial entity, whether that person is acting in their own right or in a representative fiduciary capacity. (Code Civ. Proc., § 1501(j).)
4. Provides that a digital financial asset held or owing by a business association escheats to the state if unclaimed by the owner for more than three years from either of the following:
   1. The date a written or electronic communication to the owner is returned undelivered by the United States Postal Service or by electronic mail or other electronic messaging method, as applicable.
   2. The date of the last exercise of an act of ownership interest by the owner in the digital asset account if the owner does not receive written or electronic communications from the holder or the holder does not have the means of systematically tracking or monitoring the nondelivery of those communications. (Code Civ. Proc., § 1516.5(a).)
5. Provides that the running of the three-year period in 2) shall cease immediately upon the exercise of an act of ownership, as defined, in the digital asset account or written, oral, or electronic communication with the holder as evidenced by a memorandum or other record on file with the holder or its agents. (Code Civ. Proc., § 1516.5(b).)
6. Requires the business association holding the digital financial asset to send a notice to the owner, between 6 and 12 months before the expected date of escheat, stating that the digital assets might be transferred to the state if the owner does not contact the holder. (Code Civ. Proc., § 1516.5(g).)
7. Requires the holder of any partial key to any digital financial asset subject to escheat to attempt to maintain the minimum number of keys required to transfer the digital financial assets within 60 days of determination that the digital financial assets are eligible for escheatment. (Code Civ. Proc., § 1516.5(i).)
8. Establishes processes through which the Controller must contact apparent owners of property that has escheated to the state, and for actual owners to reclaim their property held by the Controller under the UPL. (Code Civ. Proc., §§ 1531, 1540, 1541.)
9. Provides that all digital financial assets in the Controller’s custody may be converted to fiat currency at prevailing prices by any method at the Controller may determine to be advisable.
   1. The Controller must convert digital financial assets held pursuant to the UPL no sooner than 18 months, but no later than 20 months, after the assets were reported to the Controller as subject to escheat.
   2. If the Controller still has custody of the digital financial assets when the owner makes a claim, the owner shall receive the digital financial assets from the Controller.
   3. If the digital financial assets have been converted, the person shall receive the net proceeds received by the Controller from the sale. (Code Civ. Proc., § 1563(c).)
10. Provides that interest is not payable on a claim from an owner for property in the Controller’s custody under the UPL. (Code Civ. Proc., § 1540(c).)

This bill:

1. Adds the following definitions to the UPL:
   1. “Digital Asset Reserve Fund” means a fund consisting of high-quality digital assets purchased with interest, earnings, and investment income credited to the Digital Asset Claims Reserve Account established by this measure.
   2. “High-quality digital asset” means a digital financial asset with an average market capitalization of at least $100 billion over the most recent 12-month period.
   3. “Digital Asset Claims Reserve Account” means the segregated account established within the State Controller pursuant to this measure.
   4. “Net proceeds” means the amount received following the sale of the financial asset after all necessary administrative costs are deducted.
2. Requires the notice sent by a business association to an owner of digital financial assets that may be subject to escheat via electronic means; the business owner may also send the notice by United States mail if the business association sends physical correspondence to the owner in the ordinary course of business, or if it is the preferred method of contact for the owner as indicated in the business association’s records.
3. Provides that the business association satisfies the electronic notification requirement in 2) by using the apparent owner’s preferred method of contact as indicated in the business association’s records, and thereafter by using at least two of the following methods:
   1. Push notifications.
   2. Text messages.
   3. Email correspondence.
4. Provides that 2) and 3) apply regardless of the value of the digital financial asset and whether the apparent owner has consented to electronic service.
5. Modifies the content of the required notice to reflect the possible liquidation of the digital financial assets into fiat currency and the deposit of any net proceeds from the liquidation into the Digital Asset Claims Reserve Account.
6. Provides that the Controller may direct the holder of a digital financial asset to sell or to otherwise liquidate the digital financial asset and deliver the net proceeds in lieu of the native digital financial asset if any of the following conditions are met:
   1. The digital financial asset cannot reasonably be accepted for custody due to technological, security, or regulatory limitations.
   2. The costs of custody, administration, or security of the digital financial asset would exceed its value.
7. Requires a holder directed under 6) to liquidate a digital financial asset to sell or liquidate the digital financial asset by any commercially reasonable method for no less than the prevailing market price of the digital financial asset at the time of the sale.
8. Requires digital financial assets delivered to the controller to be held in their native form for between 18 and 20 months, and thereafter to be liquidated and deposited by the Controller into the Digital Asset Claims Reserve Account established by this measure.
9. Provides that any person making a valid claim before the digital financial assets are converted to fiat currency is entitled to receive the digital financial assets in their native form; or, at the person’s election, the Controller shall instead convert the digital financial assets to fiat currency at the prevailing market price at the time the claim is determined to be valid, and the person is entitled to receive the net proceeds from that conversion; if the digital financial assets have already been converted, the person is entitled to receive the net proceeds from that disposition, paid in cash from the Digital Asset Claims reserve account.
10. Provides that, notwithstanding 9), during the period that the digital financial assets are held by the Controller in their native form, the Controller may sell or otherwise liquidate the digital financial assets before the end of the period required under 8) if either of the following conditions is met:
    1. The digital financial asset cannot reasonably be maintained in custody due to technological, security, or regulatory limitations.
    2. The costs of custody, administration, or security of the digital financial asset would exceed its value.
11. Requires net proceeds from a sale or liquidation under 10) to be deposited into the Digital Asset Claims Reserve Account.
12. Provides that the Legislature may, through subsequent legislation, direct the Controller to deposit 10 percent of the digital financial assets held in the Digital Asset Reserve Fund into the General Fund.
13. Provides that the Controller may spend digital financial assets in the Digital Asset Reserve Fund or may sell digital financial assets and spend the net proceeds from the sale to pay reasonable costs associated with administering and managing the Digital Asset Reserve Fund.
14. Requires the Controller to publish a quarterly report on its website that includes:
    1. The amount of each digital financial asset held in the Digital Financial Asset Reserve Fund.
    2. An estimate of the monetary value of each digital financial asset in the Digital Asset Reserve.
    3. Any change in the amount and estimated monetary value of digital financial assets in the Digital Asset Reserve Fund.
    4. The balance of the Digital Asset Claims Reserve Account at the end of the reporting period.
    5. The amount of interest, earnings, and investment income credited to the account and transferred to the Digital Asset Reserve Fund during the reporting period.
    6. The amount of cash paid out of the account in satisfaction of verified claims during the reporting period.
15. Permits the Controller to hire or engage the services of an investment analysis to assist in investment decisions for the Digital Financial Asset Reserve Fund.
16. Provides that all interest, earnings, and investments credited to the Digital Asset Claims Reserve Account during a calendar quarter shall be transferred to the Digital Asset Reserve Fund within 30 days after the end of that quarter.
    1. The Controller, consistent with the investment policies established by the Digital Asset Reserve Fund Board, shall use the transferred amounts to purchase high-quality digital assets for the Digital Asset Reserve Fund.
    2. The Controller may make purchases for the Fund at any time consistent with the Board’s investment policy.
17. Provides that the Digital Asset Reserve Fund Board shall be established, and shall:
    1. Create guidelines for valuing assets in the Digital Asset Reserve Fund.
    2. Establish prudent investment policies relating to the investment objectives of and allocation in the Digital Asset Reserve Fund.
18. Provides that the Digital Asset Reserve Fund Board shall consist of:
    1. The Controller.
    2. The State Treasurer.
    3. The Director of the Department of Finance.
    4. One member appointed by the Speaker of the Assembly.
    5. One member appointed by the Senate Rules Committee.
    6. Two members appointed by the Governor.
19. Provides the following with respect to Board members:
    1. The appointed members shall have expertise in digital financial asset investments.
    2. The members shall serve without compensation but shall be reimbursed for actual and necessary expenses incurred through service on the Board.
    3. The members are subject to the Political Reform Act of 1974.
    4. The members appointed by the Senate Committee on Rules, the Speaker of the Assembly, and the Governor shall have three-year staggered terms. The initial appointees of the Senate Committee on Rules and the Speaker of the Assembly shall serve two-year terms, and any vacancy during an unexpired term shall be filled by appointment for the unexpired term.
20. Establishes the Digital Asset Claims Reserve Account and the Digital Asset Reserve Fund within the State Controller.
21. Provides that the net proceeds received by the Controller from the disposition or liquidation of any digital financial asset under the UPL shall be deposited into the Digital Asset Claims Reserve Account is continuously appropriated to the Controller, without regard to fiscal year, for the following purposes:
    1. The payment of valid claims for digital financial assets that have been disposed of or liquidated under the UPL, in the amount of the net proceeds received by the Controller from the disposition or liquidation of those digital financial assets.
    2. The transfer of interest, earnings, and investment income credited to the Digital Asset Claims Reserve Account to the Digital Asset Reserve Fund, as specified.
22. Requires money in the Digital Asset Claims Reserve Account to be invested by the State Treasurer, as specified, and all interest, earnings, and investment income shall be credited to the Digital Asset Claims Reserve Account.
23. Provides that 20)-22) apply only to net proceeds from the disposition or liquidation of digital financial assets that occurs on or after the effective date of this measure; net proceeds from an earlier liquidation shall not be redeposited or transferred to the Digital Asset Claims Reserve Account.

COMMENTS

1. Author’s comment

According to the author:

California faces a chronic multibillion-dollar deficit amid ongoing federal funding reductions and cuts. Without new revenue mechanisms, the state will continue relying on the same fiscal tools that have failed to keep pace with growing demand for public services. AB 2335 would establish the Digital Asset Reserve Fund to supplement the state's General Fund by capitalizing on growth in the digital asset market. The bill uses California's unclaimed property program to implement a cost-neutral investment mechanism, focusing on high-quality digital assets with demonstrated long-term stability. As the global leader in technology and innovation, California is uniquely positioned to modernize its financial systems and ensure public programs remain sustainable for the residents who depend on them.

2. Background on the UPL

The UPL provides for the “escheat” of unclaimed personal property to the state, which is the reversion of property to the state due to the failure of the owner of the property to inherit or claim the property.^[1] When property escheats to the state, the state assumes custody of the property in perpetuity, unless and until the owner claims the property.^[2] “The UPL is not a permanent or ‘true’ escheat statute” because it does not transfer legal ownership of the property to the state.^[3]

There are three significant players under the UPL: the owner, the holder, and the state. The “owner” is the person to whom the property actually belongs.^[4] The “holder” is the person who has possession of the property, such as a bank holding funds or a brokerage account holding securities.^[5] Holders of unclaimed property have no interest in the unclaimed property; they are simply trustees of the property while the property is in their possession.^[6] The third party is the state, which assumes custody of unclaimed property from the holder. The state’s custody has two purposes: by assuming custody of unclaimed property, the state can protect the owner’s interests; and, less altruistically, custody of unclaimed property allows the state to benefit from the use of the unclaimed property until the rightful owner comes along.^[7]

Unclaimed digital financial assets, such as cryptocurrencies, escheat to the state after three years of inactivity.^[8] The holder—likely a financial institution or crypto trading platform holding the digital financial assets—must file an annual report on unclaimed property and turn the property over to the Controller at the time the report is filed.^[9] Assuming the Controller does not decline to take custody of the property,^[10] the holder then must transfer the property to the Controller within a specified time.^[11] The Controller must hold digital financial assets in their original form for between 18 to 20 months, after which the digital financial assets must be converted into fiat currency.^[12] If and when the rightful owner makes a claim for their property’s return, the Controller must return the digital financial assets or the value of the sale from the assets, whichever is then in the Controller’s custody.^[13] The Controller retains the interest or other income on property or moneys that accrue after the state takes custody of the property.^[14]

The transfer of digital financial assets to the Controller is a little more complicated than the transfer of other assets. Many digital financial assets are specifically intended to exist outside the centralized financing apparatus, and therefore include security measures designed to prevent the safe transfer of assets without digital “passkeys” which may be held only by the owner. When digital financial assets are held in an account that doesn’t also hold the owner’s passkeys, there may be no way for the holder of the assets to transfer them to the Controller (or, if the owner has lost their passkeys, for them to ever recover their assets). By one estimate, 3.8 million bitcoins are in inaccessible accounts, an amount currently worth over $100 billion.^[15] Many more mainstream digital financial asset repositories, however, have passkey recovery processes.

3. What’s up with cryptocurrency these days?

Technically speaking, cryptocurrency is a type of digital asset that uses distributed ledger (blockchain) technology to enable a secure transaction. More colloquially, cryptocurrency is a digital store of value. Unlike the dollar or other fiat currencies, cryptocurrency is not considered legal tender, but private parties may agree to use it to facilitate an economic exchange. Also unlike the dollar, there is no physical manifestation of a digital financial asset that can be possessed in the physical realm; it exists only virtually.

Cryptocurrency has its legitimate uses: for proponents of decentralized finance, or “DeFi,” cryptocurrencies are “an alternative, even superior, financial instrument tat reduce[] reliance on centralized financial institutions and brokerages while enabling ‘individuals, merchants, and enterprises to execute financial transactions utilizing cutting-edge technology.’ ”^[16]

Cryptocurrency is also used for crime. Digital financial assets have also enabled vast criminal networks which, through the anonymity of the blockchain, can exchange vast amounts of value for unlawful purposes and cash out their proceeds without any of the oversight, or traceability, of fiat currency transactions. For example, the Financial Crimes Enforcement Network (FinCEN) of the United States Treasury found that cryptocurrencies are increasingly used to facilitate human trafficking and the exchange of child sexual abuse material.^[17] Similarly, the European Union Serious and Organized Crime Threat Assessment 2025 reported that cryptocurrency is part of a sea change in organized and serious crime, permitting bad actors to exchange funds without oversight and defraud individuals at a scale never before seen.^[18] The Federal Bureau of Investigation (FBI) reports that, in 2024, it received 149,686 complaints of cryptocurrency-related fraud, resulting in $9.3 billion in losses.^[19]

Because the value of most cryptocurrencies is based on nothing more than vibes, cryptocurrency values are prone to wild swings in value. These mood swings can be traced, in part, to political events. During the 2024 election, Donald Trump was seen as the “crypto candidate” and hopes were high that he would legitimize DeFi.^[20] Once he got elected, though, he issued a “meme coin” to profit off his fame and, subsequently, offered personal access to large-scale purchasers of his coin.^[21] For DeFi true believers, this was heartbreaking.^[22] That loss of optimism, plus factors like the Iran War and the perceived strength of other investments, has let to another cryptocurrency crash: the cryptocurrency market has lost nearly $2 trillion from its combined market capitalization in October 2025.^[23]

At the time this analysis was drafted, three cryptocurrencies exceed this bill’s $100 billion market capitalization threshold for being a “high-quality” digital financial asset: Bitcoin, Ethereum, and Tether.^[24] Tether is a stablecoin that is pegged to the U.S. dollar, so its value doesn’t fluctuate much.^[25] With respect to the remaining two:

• Bitcoin is currently trading in the low $60,000s per coin, down from a year-to-date high of $96,917.94 and a one-year high of $124,71.485.
• Ethereum is trading around $1,580 per coin, down from a year-to-date high of $3,353.82 and a one-year high of $4,829.83.

4. This bill requires the Controller to purchase and hold cryptocurrency in a Digital Asset Reserve Fund

The author of this bill believes that California needs to modernize its financial system by investing in cryptocurrency. To that end, this bill establishes the Digital Asset Claims Reserve Account and the Digital Asset Reserve Fund, which will be administered by the Controller and governed by the Digital Asset Reserve Fund Board. The Board will be comprised of the Controller, the State Treasurer, the Director of the Department of Finance, and four appointed members who must have expertise in digital financial asset investments.

Under this bill, when digital financial assets escheat to the state, the Controller still must convert the assets to digital financial assets to fiat currency within 18 to 20 months. If an owner claims their property before the liquidation, the owner can now receive their original digital financial assets or demand that the Controller sell the digital financial assets for them and receive the proceeds in cash.

If the digital financial assets go unclaimed before liquidation, the net proceeds from the sale are deposited in the Digital Asset Claims Reserve Account. UPL claims for escheated digital financial assets will be paid from this fund in the event that an actual owner makes a claim for their property. All interest earned from the Digital Asset Claims Reserve Account must be transferred to the Digital Asset Reserve Fund on a quarterly basis.

The Controller, under direction from the Digital Asset Reserve Fund Board, must use the monies transferred to the Digital Asset Reserve Fund to purchase “high-quality” digital assets; as discussed, this currently includes only Bitcoin, Ethereum, and Tether. As noted above, both Bitcoin and Ethereum are half to one-third of what they were worth less than a year ago. The author has agreed to amend the bill to permit, rather than require, the Controller to purchase digital financial assets for the Fund.

In addition to the creation of the Fund, this bill modifies the terms under which (1) the holder of property can notify an owner that their digital financial assets may be subject to escheat, and (2) the specific requirements relating to the Controller’s sale of digital financial assets within the 18-20 month window.

5. Amendments

As noted above, the author has agreed to permit, rather than require, the Controller to purchase digital financial assets with monies in the Digital Asset Reserve Fund. The amendment is as follows, along with any other conforming amendments the Office of Legislative Counsel believes are necessary.

Amendment

At page 15, in line 8, delete “shall” and insert “may”

6. Arguments in support

According to the California Blockchain Advocacy Coalition:

First, the bill appropriately recognizes that consumers increasingly interact with financial service providers through digital channels rather than traditional postal mail. Existing notice requirements were developed for an era in which physical mail was the primary means of communication. Today, consumers routinely receive account notifications through email, text messages, and mobile applications. Individuals move frequently, may not promptly update mailing addresses, and often disregard physical mail that appears promotional, unsolicited, or otherwise unimportant.

AB 2335 allows digital financial asset platforms to communicate with consumers using electronic methods that better reflect how consumers engage in today's marketplace. By authorizing notices through preferred electronic communication channels, including email, text messages, and push notifications, the bill substantially increases the likelihood that consumers will receive and respond to notices regarding potentially abandoned property before escheatment occurs. In doing so, the bill strengthens consumer due process, improves owner notification, and better fulfills the fundamental purpose of California's Unclaimed Property Law: reuniting owners with their property whenever possible.

Second, CBAC supports the bill's continued commitment to safeguarding consumers' digital financial assets in their native form during the statutory holding period. Consistent with the policy objectives reflected in SB 822, AB 2335 requires the Controller to maintain digital financial assets in their native form for a period of 18 to 20 months following delivery by the holder. This approach recognizes that digital assets are unique forms of property and ensures that owners retain the opportunity to recover the same assets they originally held.

Importantly, this treatment is consistent with California's longstanding approach to other investment assets, such as securities, which are similarly held for a statutory period before disposition. By preserving digital financial assets in-kind during the period in which owners are most likely to come forward and assert their rights, the bill promotes parity across asset classes while better protecting consumers from unnecessary loss of value, utility, or ownership interests associated with the original asset…

Third, AB 2335 establishes a prudent and transparent governance framework for the administration of both the Digital Asset Claims Reserve Account and the Digital Asset Reserve Fund. The bill creates the Digital Asset Reserve Fund Board, requires regular public reporting regarding balances, transfers, claims, and fund activity, and establishes clear oversight responsibilities for the management of these funds. These governance mechanisms promote accountability, transparency, and responsible stewardship of public resources.

SUPPORT

California Blockchain Advocacy Coalition

OPPOSITION

None received

RELATED LEGISLATION

Pending legislation: SB 1066 (Niello, 2026) modifies period of activity before which property escheats under the UCL, to seven years for all property types; and requires the Controller to maintain the property in the form in which it was escheated, as specified. SB 1066 is pending before the Assembly Appropriations Committee.

Prior legislation:

SB 822 (Becker, Ch. 660, Stats. 2025) amended the Unclaimed Property Law (UPL) to provide when and how digital financial assets, as defined, escheat to the state.

AB 1052 (Valencia, 2025) would have established an alternative process for the escheat of digital financial assets to the Controller under the UPL than the one adopted in SB 822. AB 1052 died in the Senate Appropriations Committee.

PRIOR VOTES

Assembly Floor (Ayes 78, Noes 0)

Assembly Appropriations Committee (Ayes 11, Noes 0)

Assembly Banking and Finance Committee (Ayes 9, Noes 0)

Assembly Judiciary Committee (Ayes 12, Noes 0)

**************

1. Code Civ. Proc., pt. 3, tit. 10, ch. 7, §§ 1500 et seq. ↑

2. Id., § 1540. ↑

3. Azure Limited v. I-Flow Corp. (2009) 46 Cal.4th 1323, 1328 (some internal quotation marks removed); Civ. Code, § 1501.5. ↑

4. Id., § 1501(g). ↑

5. Id., § 1501(e). ↑

6. Bank of America v. Cory (1985) 164 Cal.App.3d 66, 74 ↑

7. Azure Limited, supra, at p. 1328. ↑

8. Code Civ. Proc., §§ 1516.5, 1520. ↑

9. Id., § 1530. ↑

10. Id., § 1533. ↑

11. . Id., § 1532. ↑

12. Id., § 1563. ↑

13. Id., §§ 1540, 1563. ↑

14. Id., § 1562. ↑

15. Royal, Are your lost bitcoins gone forever? Here’s how you might be able to recover them (Oct. 10, 2024) Yahoo! Finance, https://finance.yahoo.com/news/lost-bitcoins-gone-forever-might-201517564.html. Not all of these bitcoins are necessarily lost forever; there’s now a cottage industry of firms promising they can recover lost cryptocurrency keys, some of whom use hacking techniques to circumvent security protections. E.g., Greenberg, They Cracked the Code to a Locked USB Drive Worth $235 Million in Bitcoin. Then It Got Weird (Oct. 24, 2023) WIRED, available at https://www.wired.com/story/unciphered-ironkey-password-cracking-bitcoin/. All links in this analysis are current as of June 26, 2026. ↑

16. Wang, Dancing With the Devil? Decentralized Finance (DeFi), Its Challenges, and Possible Regulatory Solutions (May 2026) 26 U.C. Davis Bus. L. J. 1, 4. ↑

17. FinCEN, Online Child Sexual Exploitation and Human Trafficking: Threat Pattern & Trend Information, January 2020 to December 2021 (Feb. 2024) pp. 5-8. ↑

18. See generally, European Union Serious and Organized Crime Threat Assessment 2025, The changing DNA of serious and organized crime (2025) available at https://www.europol.europa.eu/publication-events/main-reports/changing-dna-of-serious-and-organised-crime. ↑

19. FBI Internet Crime Complaint Center, Internet Crime Report 2024, p. 35, available at http://www.ic3.gov/AnnualReport/Reports/2024_IC3Report.pdf. ↑

20. Stokel-Walker, How Donald Trump became the crypto candidate in the 2024 election (Jun. 13, 2024) Fast Company, https://www.fastcompany.com/91139292/donald-trump-crypto-candidate-2024-election. ↑

21. Conlin, Buyers of $TRUMP meme spent $148 million to win dinner with President Trump (May 12, 2025) Reuters, https://www.reuters.com/world/us/buyers-trump-meme-coin-pay-millions-win-dinner-with-president-trump-2025-05-12/. ↑

22. Harty, ‘F--k this coin’: Trump set to attend memecoin conference after 96 percent wipeout (Apr. 23, 2026) Politico, https://www.politico.com/news/2026/04/23/crypto-traders-disenchanted-trump-memecoin-00888035. ↑

23. Bambrough, Collapsing At An ‘Alarming Pace’—Sudden $2 Trillion Crypto Price Crash Sparks Bitcoin Panic (Jun. 3, 2026) Forbes, https://www.forbes.com/sites/digital-assets/2026/06/03/bitcoin-is-suddenly-braced-for-a-devastating-price-crash/. ↑

24. See CoinMarketCap, https://coinmarketcap.com/. ↑

25. Tether, Transparency, https://tether.to/en/transparency/?tab=usdt. Tether is also an essential bridge for many crypto-based crimes and scams: the scammer exchanges their stolen cryptocurrency for Tether, and then Tether for U.S. dollars, giving them fiat currency that is virtually impossible to trace to the original scam. (Faux, Number Go Up (2023) p. 192.) ↑

ASSEMBLY THIRD READING

ATR Bill Id:AB 2335

Author:(Valencia)

As Amended Ver:May 18, 2026

2/3 vote.

SUMMARY

Establishes the Digital Asset Reserve Fund managed by the State Controller and directs the Controller to deposit digital financial assets that have escheated to the state in the Reserve Fund.

Major Provisions

1. Defines "High-quality digital asset" as a digital financial asset with an average market capitalization of at least one hundred billion dollars ($100,000,000,000) over the most recent 12-month period.
2. Requires that notice regarding any digital financial asset held or owing by a business association that has escheated to the state to specify that digital financial assets will be immediately put into the Digital Asset Reserve Fund until the rightful owner is identified and that the assets will be converted into high-quality assets after the 18-month holding period.
3. Requires that digital financial assets held by the Controller be deposited into the Digital Asset Reserve Fund, which is controlled by the Controller.
4. Requires the Controller to convert the digital financial assets in their native form to high-quality digital assets no sooner than 18 months, but no later than 20 months, after the actual date of filing of the required report.
5. Entitles a person making a valid claim before the Controller converts the digital financial asset to high-quality digital asset to receive the digital financial asset in its native form. Requires the Controller to revert a digital financial asset that has been converted into a high-quality asset to its native form equivalent to the amount escheated or to convert the digital financial asset to fiat currency at the prevailing price at the time a claim is determined to be valid. Entitles a person who indicates that they want their digital financial asset in fiat currency to receive the net proceeds received by the Controller from its sale.
6. Authorizes the Legislature, through subsequent legislation, to direct the Controller to deposit 10 percent of the digital assets held in the Digital Asset Reserve Fund into the General Fund.
7. Authorizes the Controller to spend digital financial assets in the Digital Asset Reserve Fund or sell digital financial assets and spend the net proceeds from the sale to pay reasonable costs associated with administering and managing the Digital Asset Reserve Fund.
8. Requires the Controller to publish a quarterly report on its internet website.
9. Permits the Controller to hire or engage the services of an investment analyst to assist in such investment decisions.
10. Establishes the Digital Asset Reserve Fund Board and entrusts the Board with specified obligations.
11. Establishes the makeup of the Digital Asset Reserve Fund Board.
12. Requires all appointed members of the governing board to have expertise in digital financial asset investments, and requires them to serve without compensation but be reimbursed for actual and necessary expenses incurred through service on the board.
13. Subjects the members of the Digital Asset Reserve Board to the Political Reform Act of 1976.
14. Assigns the members appointed by the Senate Committee on Rules, the Speaker of the Assembly, and the two members appointed by the Governor to three-year staggered terms. Grants the initial appointees of the Senate Committee on Rules and the Speaker of the Assembly two-year terms.
15. Requires any vacancy occurring during an unexpired term to be filled by appointment for the unexpired term.

COMMENTS

California's Unclaimed Property Law (UPL) governs the process by which unclaimed personal property escheats (or transfers) to the state. The goal of the law is to both reunite owners with their property and, pending such reunion, allow the state to utilize the property for the public benefit. Under the UPL, the state assumes possession and holds the property in perpetuity as a trustee for the rightful owner. (Harris v. Westly (2004) 116 Cal.App.4th 214, 219 (internal quotations omitted), Bank of America v. Cory (1985) 164 Cal.App.3d 66, 75.)

The UPL involves three distinct actors: the owner, or the person/entity with the rightful claim to the property; the holder, who is typically the business or financial institution who is in possession of the property that becomes abandoned; and the state controller who assumes custody of the unclaimed property from the holder and then administers claims, and manages the unclaimed property fund. The holder acts as a fiduciary and must report and remit property to the state when it is presumed abandoned. (Code of Civil Procedure Sections 1530-32.) Once in the controller's custody, the property is either retained (in the case of tangible property) or liquidated and deposited in the Unclaimed Property Fund.

The UPL applies to a wide range of intangible personal property, including bank accounts, uncashed checks, wages, stocks, and insurance proceeds. Property is presumed abandoned if it remains unclaimed by its owner for a statutory dormancy period. Once the controller takes custody of the property it may earn income or interest from the property, which is deposited into the General Fund, while the principal remains subject to claim by the owner indefinitely.

Last year SB 822 (Becker) Chap. 660, Stats. 2025, modified the UPL to incorporate digital financial assets (more commonly referred to as cryptocurrency). Pursuant to SB 822, digital financial assets escheat to the state after a three-year dormancy period – the same conditions and dormancy periods that apply to other forms of intangible personal property. Of particular relevance to the current measure, SB 822 required the Controller to hold escheated digital financial assets for at least 18 months, but no more than 20 months, at which point the Controller was authorized to convert the digital financial assets into fiat currency.

Acknowledging the potential boon for the state presented by more stable forms of cryptocurrency, this bill requires the Controller, upon receiving the digital financial assets, to deposit the asset into the Digital Asset Reserve Fund and to subsequently convert the asset after a specified period of time into "high-quality" digital assets and deposit them into the "Digital Asset Reserve Fund." The bill also specifies how a person may recover the asset or the value of the asset upon making a valid claim to the Controller.

The bill defines "high-quality digital asset" as a digital asset with an average market capitalization of at least one hundred billion dollars over the more recent 12-month period. This definition captures the more high-value cryptocurrencies that are more likely to provide a reliable return to the state.

The bill also authorizes the Controller to spend the digital financial assets in the Digital Asset Reserve Fund or sell them and spend the net proceeds from those sales to pay the reasonable costs associated with administering and managing the Fund. The bill requires the Controller to publish a quarterly report regarding the status of the assets in the Reserve Fund and makes conforming changes to the notice businesses that hold abandoned digital financial assets are required to provide to the asset's apparent owner.

Finally, the bill establishes the Digital Asset Reserve Fund Board and sets out the Board’s tasks as well as its makeup.

According to the Author

California faces a chronic multibillion-dollar deficit amid ongoing federal funding reductions and cuts. Without new revenue mechanisms, the state will continue relying on the same fiscal tools that have failed to keep pace with growing demand for public services. AB 2335 would establish the Digital Asset Reserve Fund to supplement the state's General Fund by capitalizing on growth in the digital asset market. The bill uses California's unclaimed property program to implement a cost-neutral investment mechanism, focusing on high-quality digital assets with demonstrated long-term stability. As the global leader in technology and innovation, California is uniquely positioned to modernize its financial systems and ensure public programs remain sustainable for the residents who depend on them.

Arguments in Support

This bill is sponsored by Satoshi Action fund. In support of their measure they submit:

Currently, California manages public funds through traditional investment mechanisms that prioritize diversification and liquidity but limit exposure to emerging financial assets. Meanwhile, other states have begun exploring digital asset strategies, authorizing investments in high-market-capitalization digital assets or managing cryptocurrency through unclaimed property programs. These efforts demonstrate that digital assets are increasingly being considered as part of broader public finance strategies.

AB 2335 provides California with a responsible framework to explore this opportunity. By utilizing escheated digital assets through the unclaimed property program, the bill creates a Digital Asset Reserve Fund overseen by fiscal officers and financial experts to ensure prudent management. This approach allows the state to responsibly evaluate digital asset investments while protecting taxpayer funds and potentially increasing long-term returns.

[…]

AB 2335 reflects the kind of forward-looking, fiscally prudent approach we champion: one that enables California to capture value from digital assets already in state custody while maintaining robust safeguards and professional oversight.

Arguments in Opposition

None on file

FISCAL COMMENTS

According to the Assembly Appropriations Committee:

1. Costs of an unknown amount to the SCO to support information security needs related to DFA conversion and the work of the DARF Board (Unclaimed Property Fund (UPF)). Additionally, ongoing costs of approximately $250,000 to $750,000 to the SCO to contract with a firm to trade DFAs on the SCO’s behalf (UPF). The SCO notes that it is currently requesting $4.2 million and 18 positions in the 2026-27 state budget to implement SB 822 (Becker), Chapter 660, Statutes of 2025, which included DFAs in the UPL program, and those resources would still be needed before consideration of the additional workload envisioned by this bill. 
2. By keeping DFAs in the DARF, instead of the GF, this bill would result in GF revenue loss.

VOTES

ASM JUDICIARY: 12-0-0

YES: Kalra, Macedo, Bauer-Kahan, Bryan, Connolly, Dixon, Harabedian, Pacheco, Papan, Sanchez, Stefani, Zbur

ASM BANKING AND FINANCE: 9-0-0

YES: Valencia, Chen, Dixon, Fong, Krell, Michelle Rodriguez, Blanca Rubio, Schiavo, Soria

ASM APPROPRIATIONS: 11-0-4

YES: Wicks, Aguiar-Curry, Calderon, Caloza, Fong, Mark González, Krell, Pacheco, Pellerin, Sharp-Collins, Solache

ABS, ABST OR NV: Hoover, Dixon, Ta, Tangipa

UPDATED

VERSION: May 18, 2026

CONSULTANT: Manuela Boucher / JUD. / (916) 319-2334 FN: 0002789

Date of Hearing: May 6, 2026

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Buffy Wicks, Chair

ABPCA Bill Id:AB 2335

Author:(Valencia) – As Amended Ver:April 22, 2026

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill creates the Digital Asset Reserve Fund (DARF) for the deposit of digital financial assets (DFAs) escheated to the state under the Unclaimed Property Law (UPL) and requires the State Controller (SCO) convert those DFAs into high-quality digital assets.

Specifically, this bill:

1. Creates the DARF where the SCO must deposit DFAs escheated to the state, requires the SCO to convert those DFAs into high-quality digital assets between 18 months and 20 months after the filing date, and authorizes the SCO to engage qualified staking services providers to stake DFAs in the DARF.
2. Requires an existing notice a business association must send the apparent owner of a DFA prior to transferring the unclaimed property to the state to additionally inform the apparent owner that DFAs (a) will be put into the DARF and converted into high-quality digital assets after the 18-month holding period and (b) may be staked through a qualified staking service provider to generate network participation rewards and the return of assets may require completion of an unstaking process.
3. Entitles an owner who makes a valid claim before the conversion occurs to receive their DFAs in native form or fiat currency and requires, if the claim is made after conversion, the SCO to revert the DFAs to their native form or convert the DFAs to fiat currency at the prevailing market price.
4. Authorizes the Legislature to direct the SCO to deposit 10% of the DFAs held in the DARF into the General Fund (GF), authorizes the SCO to spend or sell DFAs in the DARF to pay for the reasonable costs to administer and manage the DARF, and authorizes the SCO to engage an investment analyst to assist in investment decisions.
5. Requires the SCO to use staking rewards to purchase high-quality digital assets for the DARF, requires the DARF to bear any loss resulting from a slashing event or other protocol-level penalty incurred during the staking of DFAs in the DARF, and requires the SCO to follow a certain process if it receives a valid claim for escheated DFAs that are staked.
6. Requires the SCO to publish a quarterly report on its website with certain DARF performance metrics, such as the change in the estimated monetary value of DFAs in the DARF and the amount of staking rewards earned during the reporting period.
7. Creates the seven-member Digital Asset Reserve Fund Board (DARF Board), which must include the SCO, State Treasurer, Department of Finance director, and other appointees, as a governing board to create guidelines for valuing assets in the DARF and establish prudent investment policies, including risk management policies for staking.

FISCAL EFFECT:

1. Costs of approximately $678,000 annually to the SCO for three additional positions to support information security needs related to DFA conversion and staking and the work of the DARF Board (Unclaimed Property Fund (UPF)). Additionally, ongoing costs of approximately $250,000 to $750,000 to the SCO to contract with a firm to trade DFAs on the SCO’s behalf (UPF). The SCO notes that it is currently requesting $4.2 million and 18 positions in the 2026-27 state budget to implement SB 822 (Becker), Chapter 660, Statutes of 2025, which included DFAs in the UPL program, and those resources would still be needed before consideration of the additional workload envisioned by this bill. 
2. By keeping DFAs in the DARF, instead of the GF, this bill would result in GF revenue loss. To the extent the SCO earns staking rewards to purchase additional high-quality digital assets, this bill may result in DARF revenue gain, which may eventually be transferred to the GF. However, staking could also result in DARF revenue loss, which would decrease the amount of revenue available for GF transfer.

The Legislative Analyst’s Office recently warned of GF structural deficits of around $35 billion per year in the 2027-28 fiscal year and ongoing.

COMMENTS:

1. Purpose. According to the author:

California faces a chronic multibillion-dollar deficit amid ongoing federal funding reductions and cuts. Without new revenue mechanisms, the state will continue relying on the same fiscal tools that have failed to keep pace with growing demand for public services. AB 2335 would establish the Digital Asset Reserve Fund to supplement the state’s General Fund by capitalizing on growth in the digital asset market. The bill uses California’s unclaimed property program to implement a cost-neutral investment mechanism, focusing on high-quality digital assets with demonstrated long-term stability.

1. Background. UPL. Under the UPL, the SCO is responsible for safeguarding lost and forgotten property turned over to the state (such as bank accounts, uncashed checks, insurance benefits, wages, stocks, bonds, and safe deposit box contents) until claimed by the rightful owner. A possible owner may search an online database of properties and, if the person believes they own the listed property, submit a claim for review. The SCO reviews filed claims and supporting documentation of ownership to determine if someone is the actual property owner.

DFAs as Unclaimed Property. A DFA, also referred to as “cryptocurrency” or “crypto,” is a digital representation of value that is not issued or backed by a government or central bank. Unlike the dollar, a DFA is not considered legal tender, but private parties may agree to use a DFA to facilitate an economic exchange.

SB 822 (Becker) included DFAs in the UPL program and prescribes the processes for transferring escheated DFAs from the holder to the SCO and returning DFAs to the owner. Notably, SB 822 authorizes the SCO to convert DFAs into fiat currency after holding the DFAs for at least 18 months. This bill instead requires the SCO to convert DFAs into “high-quality digital assets,” defined as a DFA with an average market capitalization of at least $100 billion over the most recent 12-month period, which are more likely to provide a reliable return to the state. Otherwise, as noted in the Assembly Judiciary Committee’s analysis of this bill, “The volatility of cryptocurrency generally would tend to undermine one of the core tenets of the UPL – to allow the state to utilize unclaimed property to earn interest to bolster the state’s GF.” This bill also establishes the DARF Board to create guidelines for valuing assets in the DARF and set prudent investment policies, including risk management policies for staking.

Impact on the GF. As described by the Legislative Analyst’s Office in a March 15, 2019, budget publication about the UPL:

the value of property remitted to the state always exceeds the value of property reunited with owners. The difference provides a monetary benefit to the state, which first is deposited into the Unclaimed Property Fund and then transferred to the [GF]. The state uses the unclaimed property fund to finance SCO’s administrative costs to operate the program. The remainder – the amount that is not reunited with owners or used for unclaimed property administration – provides a source of [GF] revenue. This money is spent on programs throughout the [GF] budget.

This bill requires the deposit of escheated DFAs into the DARF instead of following the existing UPL fund transfer process. Although this bill allows the Legislature to direct the SCO through subsequent legislation to deposit 10% of DFAs in the DARF into the GF, there is no requirement for such a transfer to ever happen, resulting in GF revenue loss.

1. Support if Amended. This bill is supported by the Satoshi Action Fund and Blockchain Cooperative Coalition. The California Blockchain Advocacy Coalition writes that “we support this bill in concept” but “urge amendments to ensure that consumer assets are protected and operational considerations are addressed” noting:

converting assets from their original form into a different category of digital asset could create complexities in ensuring that claimants are made whole in a manner consistent with expectations. As digital asset markets continue to evolve, preserving flexibility in how assets are managed – and ensuring alignment with the goal of returning assets in their native form where appropriate – may help avoid unintended outcomes for consumers.

Analysis Prepared by: Irene Ho / APPR. / (916) 319-2081

Date of Hearing: April 20, 2026

ASSEMBLY COMMITTEE ON BANKING AND FINANCE

Avelino Valencia, Chair

ABPCA Bill Id:AB 2335 (

Author:Valencia) – As Amended Ver:March 26, 2026

SUBJECT: Unclaimed property: digital financial assets

SUMMARY: Specifically, this bill:

1. Defines “high-quality digital asset” to mean a digital financial asset with an average market capitalization of at least one hundred billion dollars ($100,000,000,000) over the most recent 12-month period.
2. Specifies that digital financial assets (DFA) will be immediately put into the Digital Asset Reserve Fund until the rightful owner is identified, and that the assets will be converted into high-quality assets after the 18-month holding period consistent with existing law. 
3. Requires the Controller to convert DFA in their native form to high-quality digital assets no sooner than 18 months, but no later than 20 months, after the actual date of filing of the report that is required under current law. 
4. Entitles any person who makes a valid claim before conversion, to receive the DFA in their native form or in fiat currency.
5. If the DFA have been converted into high-quality assets, the Controller is required to do either:
   1. Revert the assets to their native form equivalent to the amount escheated. Or
   2. Convert the digital financial assets to fiat currency at the prevailing market price at the time the claim is determined to be valid.
6. Entitles any person who elects to receive the digital financial assets in fiat currency pursuant to 5(b) to receive the net proceeds from the Controller’s conversion of the assets.

EXISTING LAW:

1. Establishes the Unclaimed Property Law (UPL), which establishes when and how intangible property escheats to the state for the state to take custody of, but not own, unclaimed property. (Code of Civil Procedure Section 1500 et seq. All further statutory references are to the Code of Civil Procedure, unless otherwise specified.)
2. Provides that property received by the state pursuant to the UPL shall not permanently escheat to the state, and that it is the intent of the Legislature that property owners be reunited with their property. (Section 1501.5.)
3. Provides the procedure by which any digital financial asset held or owing by a business association escheats to the state if unclaimed by the owner for more than three years from either: 1) the date a written electronic communication to the owner is returned undelivered or by electronic mail, or 2) the date of the last exercise of an act of ownership interest by the owner in the digital asset account if the owner does not receive written or electronic communications from the holder or the holder does not have the means of systematically tracking or monitoring the nondelivery of those communications. (Code of Civil Procedure Section 1516.5.) 
4. Provides that all tangible personal property and all intangible personal property, except as otherwise specified, that is held or owing in the ordinary course of the holder’s business and has remained unclaimed by the owner for more than three years after it became payable or distributable escheats to the state.
   1. Except where a statute establishes a different notice requirement for specific types of property, notice must be given as provided when the property is valued at $50 or more.  The holder shall make reasonable efforts to notify the owner by mail or, if the owner has consented to electronic delivery, electronically; the notice shall be mailed not fewer than 6 and not more than 12 months before the time when the property becomes reportable to the Controller as unclaimed. 
   2. The notice must be accompanied by a form which the owner can return to the holder to indicate that they are active; if the owner signs and returns the form, the escheat period recommences.
   3. A holder can provide a telephone number or electronic means for the owner to contact them in lieu of the form. (Section 1520.)
5. Requires every person holding funds or other property escheated to the state to file a report with the Controller as specified. (Section 1530.)
6. Requires every person filing a report of unclaimed property that will escheat to the state to, no sooner than seven months and no later than seven months and 15 days after the final date for filing the report, pay or deliver to the Controller all escheated property specified in the report. (Section 1532 (a).) 
7. Requires the holder of any digital financial asset that escheats to the state, no more than 30 days after the final date for filing a report of unclaimed property, to transfer the exact digital financial asset type, private keys, and amount, unliquidated, to the Controller’s cryptocurrency custodian or as the Controller by regulation may designate. (Section 1532 (e).) 
8. Authorizes the Controller to convert digital financial assets in its possession to fiat currency at prevailing prices by any method that the Controller may determine to be advisable. Requires the Controller to convert such digital financial assets no sooner than 18 months, but no later than 20 months, after the actual date of filing the report required by the holder of the person holding escheated property. (Section 1563 (c).) 
9. Entitles a person making a valid claim for digital assets that have been delivered to the Controller and that remain in the custody of the Controller to receive the digital financial assets from the Controller. Entitles a person making a valid claim to receive the net proceeds received by the Controller from its sale if the digital financial assets have been converted. (Section 163 (c).) 
10. Defines “digital financial asset” as a digital representation of value that is used as a medium of exchange, unit of account, or store of value, and that is not legal tender, whether or not denominated in legal tender; but “digital financial asset” does not include any of the following:
    1. A transaction in which a merchant grants, as part of an affinity or rewards program, value that cannot be taken from or exchanged with the merchant for legal tender, bank or credit union credit, or a digital financial asset.
    2. A digital representation of value issued on or behalf of a publisher and used solely within an online game, game platform, or family of games sold by the same publisher or offered on the same game platform.
    3. A security registered with or exempt from registration with the United States Securities and Exchange Commission or a security qualified with or exempt from qualifications with the DFPI. (Financial Code Section 3102 (g).)

FISCAL EFFECT: Unknown. This bill is keyed Fiscal by Legislative Counsel.

COMMENTS:

1. Purpose

Statement from the Author

“California faces a chronic multibillion-dollar deficit amid ongoing federal funding reductions and cuts. Without new revenue mechanisms, the state will continue relying on the same fiscal tools that have failed to keep pace with growing demand for public services. AB 2335 would establish the Digital Asset Reserve Fund to supplement the state's General Fund by capitalizing on growth in the digital asset market. The bill uses California's unclaimed property program to implement a cost-neutral investment mechanism, focusing on high-quality digital assets with demonstrated long-term stability. As the global leader in technology and innovation, California is uniquely positioned to modernize its financial systems and ensure public programs remain sustainable for the residents who depend on them.”

1. Background

In 2025, SB 822 was signed into law allowing the State Controller to take custody of unclaimed digital financial assets. California’s unclaimed property law (UPL) governs the process by which unclaimed personal property escheats to the state. The UPL framework is one based on custodial possession instead of ownership. The state assumes possession and holds the property in perpetuity as a trustee for the rightful owner.^[1] This custodial model was designed to preserve individual property rights while permitting the state to benefit from the use of dormant funds.^[2] 

UPL involves three distinct parties: the owner, or the person/entity with the rightful claim to the property; the holder, who is typically the business or financial institution that is in possession of the property that becomes abandoned; and the state Controller who assumes custody of the unclaimed property from the holder and then administers claims and manages the unclaimed property fund on behalf of the state. The holder acts as a fiduciary and must report and remit property to the state when it is presumed abandoned.^[3] The Controller can retain custody of tangible and intangible property. Once in the Controller’s custody, the property is either retained (in the case of tangible property) or liquidated (in the case of securities) and deposited in the Unclaimed Property Fund. Any interest, dividends, or other benefits accrued before or at liquidation of unclaimed property is credited to the owner’s account. Any interest or income derived from the investment of money deposited in the Unclaimed Property Fund is transferable to the General Fund.^[4]

SB 822 requires the Controller to accept digital financial assets in their native form, holding them as such for no less than 18 months, but no longer than 20 months from the actual date of reporting as required under the statute.^[5] If digital financial assets delivered to the Controller remain in the custody of the Controller, a person making a valid claim for those assets under this chapter shall be entitled to receive the digital financial assets from the Controller. If the digital financial assets have been converted, the owner shall be entitled to receive the net proceeds received by the Controller from its sale.^[6] The Controller may select one or more custodians for the management and safekeeping of digital financial assets that have escheated to the state.^[7] 

When making a selection for custodian of escheated digital financial assets, the controller must consider the following criteria: 

1. Storage security to ensure the safekeeping of digital financial assets, including robust cybersecurity measures to prevent unauthorized access.
2. Capability to manage private keys associated with digital financial assets and ensure the ability to transfer or transact with the assets when required.
3. Proven experience in handling digital financial assets.
4. Compliance with all applicable federal and state regulations related to digital financial asset custody.
5. Regular reporting mechanisms to the Controller regarding the status and value of the digital financial assets in their custody.
6. Processes to reunite owners with their digital financial assets, including maintaining updated contact records and issuing timely notifications.
7. Qualifying as a “financial institution” under Chapter X of Title 31 of the Code of Federal Regulations, which subjects the qualified custodian to the anti-money laundering obligations of the federal Bank Secrecy Act (31 U.S.C. Sec. 5311 et seq.), in addition to any state-imposed anti-money laundering obligations.
8. Any other factor that the Controller deems relevant.
9. What this bill does

AB 2335 establishes the Digital Asset Reserve Fund for the custody of escheated digital assets and mandates the Controller to convert DFA into high-quality digital assets. This bill requires asset holders to notify owners that, upon escheatment, assets will be transferred to the Digital Asset Reserve Fund and subsequently converted into high-quality assets following the requisite holding period. Additionally, the bill institutes a Digital Asset Reserve Board to oversee fund administration and requires the Controller to execute specified actions, including the publication of quarterly reports. The Controller must convert escheated DFA into high-quality digital assets no sooner than 18 months, but no later than 20 months, from the filing date of the unclaimed property report. Any person submitting a valid claim prior to conversion is entitled to receive the DFA in its native form or in fiat currency.

1. What is an Asset Reserve Fund?

The California constitution requires the Legislature to pass a balanced budget.^[8] In some years, the state will collect more revenue than its costs, and in other years, it will collect less; reserves smooth out the difference. State reserves ensure stable funding for the state’s services over time, even when revenue fluctuates unpredictably. Using reserves during years of shortfall helps avoid increasing taxes or cutting core programs. State investments are conducted through the Office of the Treasurer with Government Code Section 16430 providing the rules for eligible securities for the investment of surplus. Examples of eligible securities are conservative interest bearing U.S. Treasury bonds and shares of money market mutual funds that meet specific conditions.^[9]

1. Currently Enacted Digital Financial Asset Reserves

On March 6, 2025, Executive Order 14233 was signed by President Donald Trump establishing the Strategic Bitcoin Reserve and United States Digital Asset Stockpile. The order directed the secretary of the Treasury to do several tasks; 1) establish an office to administer and maintain control of custodial accounts collectively known as the “Strategic Bitcoin Reserve”; 2) establish an office to administer and maintain control of accounts collectively known as the “United States Digital Asset Stockpile,” capitalized with all digital assets owned by the Department of the Treasury, other than BTC, that were finally forfeited as part of criminal or civil asset forfeiture proceedings; and 3) with the secretary of Commerce, develop strategies for acquiring additional government BTC provided that such strategies are budget neutral and do not impose incremental costs on United States taxpayers.^[10] The Order cites the scarcity of bitcoin and the fact that the Bitcoin protocol has never been hacked as reasons for a “strategic advantage” against other nations to create a bitcoin reserve. The federal government holds a significant amount of bitcoin from criminal forfeiture and civil penalties, but until the Order, there was no established policy to maximize BTC’s position as currency in the global market. 

New Hampshire, Texas, and Arizona have recently passed legislation to create digital financial asset reserve funds in their respective states. Enacted in May 2025, New Hampshire established a strategic reserve that encompasses exchange-traded products,^[11] precious metals, and digital financial assets. The new law allows the state treasurer to invest no more than a total of five percent of public funds in precious metals and any digital assets with a market capitalization of over $500 billion averaged over the previous calendar year from the general fund, the revenue stabilization fund, and any other funds as authorized by the legislature.^[12]

Soon after New Hampshire, Texas enacted its Strategic Bitcoin Reserve; a special fund operating outside of the state’s treasury under the state’s comptroller. The fund is used to purchase bitcoin and other digital financial currency.^[13] The Texas statute empowers the comptroller to administer and manage the reserve, including maintaining custody of digital financial assets and the power to purchase, exchange, and sell assets with reasonable care on par with a prudent investor. The state’s legislature may appropriate funds for deposit 1) to the credit of the reserve to invest in bitcoin or other cryptocurrency and 2) administering and managing the reserve.^[14]

Around the same time, Arizona enacted a statute creating the Bitcoin and Digital Asset Reserve Fund.^[15] This model is a budget-neutral approach to funding its reserve. This reserve fund is administered and operated through the state treasurer. Unlike the Texas and New Hampshire statutes, Arizona’s statute does not provide for the purchase of bitcoin and other cryptocurrencies. In matters of unclaimed property, the state of Arizona assumes custody and control of unclaimed property, not an ownership interest; a framework similar to California’s. To fund its digital asset reserve fund, it uses the state’s unclaimed digital financial assets to generate rewards from staking and airdrops (a marketing or engagement strategy used to build awareness or encourage early adoption of a new blockchain project by distributing free tokens or coins to wallet holders who may need to complete certain tasks like sharing the information on social media or making a video). If after three years from the date of transfer the property remains unclaimed, any staking rewards and airdrops may be transferred to the reserve fund.^[16]

1. Proposed Legislation in Other States

Massachusetts has three bill proposals regarding digital financial asset reserve funds. 

The first, SB 1967, establishes a strategic reserve to be managed by the state treasurer. The bill authorizes investment of unexpended state funds, up to 10% of annual Stabilization Fund deposits, into bitcoin or other digital assets, and also allows the reserve to hold digital assets seized by the state. Assets may be held directly by the treasurer, through qualified custodians, or through regulated exchange-traded products. The treasurer is also permitted to loan bitcoin or digital assets, if it can be done without increasing financial risk, in order to generate additional returns for the state. 

Similarly, SB 2008 and House Bill 3279 authorize the state treasurer and public pension funds to invest in bitcoin and other “stable digital financial assets” as a hedge against inflation and to enhance fiscal resilience. The bills allow for a maximum of 10% of specific state financial reserves—such as the general fund, stabilization fund, and the retiree benefits trust—to be invested in bitcoin. The measures establish a 5% excise tax on digital currency revenues. Furthermore, it permits the state to lend its digital assets to earn returns. The revenue generated from these activities will be deposited into the general fund, with provisions for reimbursement and strict oversight to ensure financial security.

Michigan’s proposed legislation, HB 4087, is very similar to Massachusetts' proposed legislation, nearly combining the three proposals. The Michigan proposal limits available funds from the general fund and economic stabilization fund to 10% for the state to invest in cryptocurrency, it allows the treasurer to hold cryptocurrency through secure custody solutions, qualified custodians, or exchange-traded products, and to loan the cryptocurrency if it does not increase financial risk.

In Ohio, two measures, HB 18 and SB 57, also reflect the same terms seen in the Massachusetts proposals: the authority to invest in cryptocurrency and the establishment of a digital asset reserve fund. HB 18 permits the treasurer to invest up to 10% of interim funds from the general fund and budget stabilization fund, along with other specific funds. However the investments are restricted to exchange-traded products with a minimum average market capitalization of $750 billion over the preceding twelve months. The bill also amends several existing sections of the statute to explicitly allow state retirement boards to invest in these exchange-traded products, while maintaining their fiduciary responsibilities to prioritize financial returns. SB 57 enacts a bitcoin reserve fund in the state treasury. Additionally, the bill allows law enforcement agencies to transfer forfeited bitcoin to the state's bitcoin reserve fund.

1. Rewards Earning Potential through Staking

“Staking” is a service in which any user with the right hardware and software, reliable and high internet speed, and the right amount of currency can partake. Proof of stake (PoS) is a consensus mechanism used by some blockchains to validate transactions efficiently,  unlike “mining” which consumes a large amount of energy. “Staking” is the act of locking away a portion of a participant’s (known as a validator) currency, like a good-will security deposit, to gain and maintain eligibility to participate in the selection process for securing the network and creating more blocks in exchange for payment. The more coins a validator stakes, the higher their chances of being selected and thus to earn payment. Since the value of the payments fluctuate, and PoS is based on a behavioral incentivization, these payments for services are characterized as “rewards”.  This “skin-in-the-game” model encourages participants to perform accurately–good behavior results in payment, malicious or undesirable behavior results in penalization against the participants personal stake or slashing of the entire amount. Slashing results in prevention from participation and forcible exit. Thus, staking is a service for which validators are given rewards. Any loses the validator incurs is at their own hands.

The Digital Asset Reserve Fund has the potential to gain rewards for its own administration and maintenance by staking DFA. However, staking escheated assets alone is not that simple, Committee amendments reached with the author have been provided, but the author may wish to further consideration the following issues raised by industry experts:

• Principal-liability mismatch creates an “underwater” pathway. Unclaimed property is a liability, not a discretionary investment pool. Claims can arrive at any time. If the principal backing those claims is held in volatile reserve assets, a drawdown can leave the reserve temporarily or persistently below the claim base. Even if long-term expected returns are positive, the program can still face shortfalls at precisely the moment claims must be paid.
• Option A: Use the existing custodial window and fund the reserve only from value accretion while assets are held in native form, then follow the current liquidation and sweep structure for principal.
  • This approach keeps the existing statutory structure intact, including the existing custodial period before conversion. During that custodial window, the Controller could be authorized to capture protocol-based rewards, distributions, or other value accretion that occurs without impairing principal, and dedicate only those incremental amounts to purchasing “high-quality” digital assets for the reserve. After the current conversion timeline, principal would be handled the same way it is today: converted and treated under the existing cash framework.
  • This matters because the unclaimed property program receives new property continuously. That means there will always be a rolling balance of digital assets in custody across cohorts, and therefore a continuing stream of potential value accretion. 
• Option B: Keep the existing liquidation timing, but segregate the resulting cash principal and fund the reserve only from interest on that cash, without reducing principal.
  • This approach keeps digital assets in native form until liquidation on the existing schedule, then places the resulting cash into a segregated claims-paying fund that is not swept into the General Fund for this category. The principal stays intact and reclaimable in cash. The state would then use only interest earned on that cash pool to purchase “high-quality” digital assets for the reserve.

COMMITTEE AMENDMENTS 

Add the following definitions:

1. “Qualified staking service provider” means a financial institution or technology service provider that offers staking services for digital financial assets and that meets the selection criteria established by the Digital Asset Reserve Fund Board pursuant to Section 1563.5, including, at a minimum, demonstrated operational experience, cybersecurity protocols, insurance or bonding adequate to protect staked assets against loss, and compliance with applicable state and federal law.
2. “Slashing” means the partial or total forfeiture of staked digital financial assets imposed automatically by a blockchain protocol as a penalty for validator misconduct, including, but not limited to, double-signing, extended downtime, or other violations of the protocol’s consensus rules.
3. “Staking” means the process of committing digital financial assets to a blockchain protocol’s consensus mechanism, or delegating digital financial assets to a validator or validator pool, in order to support the operation, security, or validation of the blockchain network, in exchange for rewards generated by the protocol.
4. “Staking rewards” means the digital financial assets generated and received as compensation for staking, including any protocol-level incentives, transaction fees, or other distributions received as a direct result of staking activities.

To section 1516.5, provide notice to owners that their DFA may be staked, add:

Specify that digital financial assets held in the Digital Asset Reserve Fund may be staked through a qualified staking service provider to generate network participation rewards, and that the return of assets to a verified claimant may require completion of an unstaking process.

To the quarterly reports required by the Controller, add: 

1. The amount and type of each digital financial asset currently staked, the qualified staking service provider used, and the staking method and validator or protocol used.
2. The amount of staking rewards earned during the reporting period, the cumulative staking rewards earned since inception of the fund, and the amount of high-quality digital assets purchased with staking rewards.
3. Any slashing events incurred during the reporting period, including the amount of digital financial assets lost and the qualified staking service provider and validator involved.

Provide staking services, add:

1. The Controller is authorized to engage one or more qualified staking service providers to stake digital financial assets held in the Digital Asset Reserve Fund, whether in their native form or as high-quality digital assets, and to engage in related network participation activities on behalf of the fund, subject to the staking policies established by the Digital Asset Reserve Fund Board pursuant to Section 1563.5. The Digital Asset Reserve Fund Board shall prioritize direct protocol-level staking over methods that introduce intermediary smart contract risk. Until the Digital Asset Reserve Fund Board adopts its initial staking policy, the Controller may engage a qualified staking service provider to stake digital financial assets.
2. All staking rewards derived from digital financial assets in the Digital Asset Reserve Fund are the property of the Digital Asset Reserve Fund. The Controller shall use staking rewards to purchase high-quality digital assets for the Digital Asset Reserve Fund.
3. Upon verification of a valid claim to escheated digital financial assets that are staked at the time of the claim, the Controller shall do all of the following:
   1. Notify the claimant in writing within five business days of verification that the digital financial assets are currently staked, the estimated unstaking timeline, and the expected date of return.
   2. Direct the qualified staking service provider to initiate unstaking procedures within three business days of claimant verification.
   3. Return the digital financial assets to the claimant within 60 calendar days of claimant verification, or within five business days following the completion of the unstaking process, whichever is later. The claimant’s entitlement to the form of the digital financial asset, whether in native form or as a high-quality digital asset, shall be determined under paragraph (1). The claimant shall not be entitled to any share of staking rewards.
   4. If the claimant elects to receive fiat currency in lieu of digital financial assets, the Controller shall convert the digital financial assets to fiat currency at prevailing market prices upon completion of the unstaking process and remit the net proceeds to the claimant.
4. The Digital Asset Reserve Fund shall bear any loss resulting from a slashing event or other protocol-level penalty incurred during the staking of fund assets. A verified claimant shall be entitled to the full amount of their claim as calculated under paragraph (1), regardless of any slashing loss. The Digital Asset Reserve Fund Board shall establish risk management policies that include, at a minimum, qualified staking service provider selection criteria, validator diversification requirements, and reserve adequacy standards to protect against slashing losses.

From section 1563.5(b) strike “fund” and insert:

Fund, including staking policies that specify eligible assets, approved staking methods and protocols, maximum staking percentages, qualified staking service provider selection criteria, and risk management requirements. In establishing qualified staking service provider selection criteria, the Digital Asset Reserve Fund Board shall prioritize the adequacy of insurance or bonding maintained by the provider to protect the fund against loss of staked assets.

REGISTERED SUPPORT / OPPOSITION:

Support

Last verified 4/16/26

Blockchain Cooperative Coalition

Satoshi Action Fund

Opposition

Last verified 4/16/26

None received.

Analysis Prepared by: Desiree Nguyen Orth / B. & F. / (916) 319-3081

1. Harris v. Westly (2004) 116 Cal.App.4th 214, 219 (internal quotations omitted), Bank of America v. Cory (1985) 164 Cal.App.3d 66, 75. ↑

2. Azure Limited v. I-Flow Corp. (2009) 46 Cal.4th 1323, 1328 (internal quotations omitted).) ↑

3. Cal. Code Civil Proc. Section 1530-1532 ↑

4.  Cal. Code Civil Proc. Section 1562 ↑

5. Cal. Code of Civil Proc. Section 1563(c) ↑

6.  Id.  ↑

7. Cal. Code of Civil Proc. Section 1568 ↑

8. California Constitution Article IV, Section 12 ↑

9. Cal. Government Code Section 16430 (p) ↑

10.  Executive Order 14233 Section 3 (a), (b), and (c). ↑

11. Exchange-traded products means any financial instrument that is approved by the Securities and Exchange Commission, the Commodities Future Trading Commission or the state securities commissioner that is traded on a United States-regulated exchange and derives its value from an underlying pool of assets, such as stocks, bonds, commodities, or indexes. NH Rev. Stat §6:8-d (I)(a). ↑

12. NH Rev. Stat §6:8-d(II) and (III). ↑

13. TX Government Code Section 403.701-403.709, effective June 2025. ↑

14.  TX Government Code Section 403.703(c). ↑

15. AZ Rev Stat § 41-180 (2025) ↑

16. AZ Rev Stat § 44-308(d) ↑

Date of Hearing: March 24, 2026

ASSEMBLY COMMITTEE ON JUDICIARY

Ash Kalra, Chair

ABPCA Bill Id:AB 2335

Author:(Valencia) – As Introduced Ver:February 19, 2026

PROPOSED CONSENT (As Proposed to be Amended)

SUBJECT: Unclaimed property: digital financial assets

KEY ISSUE: should the legislature establish the digital asset reserve fund, require the controller to deposit digital financial assets that have escheated to the state into the reserve fund, and require the controller to convert digital financial assets into high-quality digital financial assets after a statuTory waiting period has lapsed?

SYNOPSIS

The Unclaimed Property Law (UPL) outlines procedures by which the state assumes control over Californians’ unclaimed property. Part of the goal of the UPL is to provide the state a way to use unclaimed property for the benefit of the state, namely to use the value of the state’s unclaimed property to bolster the General Fund. Last year, SB 822 (Becker) Chap. 660, Stats. 2025, modified the UPL to incorporate digital financial assets. Among its provisions, it authorized the Controller to convert escheated digital financial assets into fiat currency. Recognizing the immense variation in value among different forms of digital financial assets, this bill proposes to require the Controller to convert escheated digital financial assets into “high-value” digital assets, potentially giving the state a much more significant financial opportunity. As currently in print the bill inadvertently removes the ability of an owner of the property to make a claim and recover the digital financial asset, or its equivalent value, from the Controller. The author is proposing amendments to rectify this drafting error and re-incorporate that authority in the context of the conversion of the digital asset into a high-value digital asset, rather than dollars. These changes are incorporated into the SUMMARY and discussed in the COMMENTS section of this analysis.

This bill is sponsored by Satoshi Action Fund. There is no additional support and no registered opposition. Should this bill be approved by this Committee it will be referred to the Assembly Committee on Banking & Finance.

SUMMARY: Establishes the Digital Asset Reserve Fund managed by the State Controller and directs the Controller to deposit digital financial assets that have escheated to the state in the Reserve Fund. Specifically, this bill:

1. Establishes the intent of the Legislature to clarify that digital financial assets are intangible property that are subject to the Unclaimed Property Law.
2. Defines “Digital Asset Reserve Fund” as a fund consisting of digital financial assets escheated to the Controller as specified.
3. Defines “High-quality digital asset” as a digital financial asset with an average market capitalization of at least one hundred billion dollars ($1000,000,000,000) over the most recent 12-month period.
4. Requires that notice regarding any digital financial asset held or owing by a business association that has escheated to the state to specify that digital financial assets will be immediately put into the Digital Asset Reserve Fund until the rightful owner is identified and that the assets will be converted into high-quality assets after the 18-month holding period.
5. Requires that digital financial assets held by the Controller be deposited into the Digital Asset Reserve Fund, which is controlled by the Controller.
   1. Requires the Controller to convert the digital financial assets in their native form to high-quality digital assets no sooner than 18 months, but no later than 20 months, after the actual date of filing of the report required by Section 1530.
   2. Entitles a person making a valid claim before the Controller converts the digital financial asset to high-quality digital asset to receive the digital financial asset in its native form. Requires the Controller to revert a digital financial asset that has been converted into a high-quality asset to its native form equivalent to the amount escheated or to convert the digital financial asset to fiat currency at the prevailing price at the time a claim is determined to be valid. Entitles a person who indicates that they want their digital financial asset in fiat currency to receive the net proceeds received by the Controller from its sale.
6. Authorizes the Legislature, through subsequent legislation, to direct the Controller to deposit 10 percent of the digital assets held in the Digital Asset Reserve Fund into the General Fund.
7. Authorizes the Controller to spend digital financial assets in the Digital Asset Reserve Fund or sell digital financial assets and spend the net proceeds from the sale to pay reasonable costs associated with administering and managing the Digital Asset Reserve Fund.
8. Requires the Controller to publish a quarterly report on its internet website that includes:
   1. The amount of each digital financial asset held in the Digital Financial Asset Reserve Fund;
   2. An estimate of the monetary value of each digital financial asset in the Digital Asset Reserve Fund;
   3. Any change in the amount and estimated monetary value of digital financial assets in the Digital Asset Reserve Fund.
9. Permits the Controller to hire or engage the services of an investment analyst to assist in such investment decisions.
10. Establishes the Digital Asset Reserve Fund Board which is required to do all of the following:
    1. Create guidelines for valuing assets in the Digital Asset Reserve Fund;
    2. Establish prudent investment policies relating to the investment objectives of and asset allocation in the Digital Asset Reserve Fund;
11. Establishes the following makeup of the Digital Asset Reserve Fund Board:
    1. The Controller;
    2. The State Treasurer;
    3. The Director of the Department of Finance;
    4. One member appointed by the Speaker of the Assembly;
    5. One member appointed by the Senate Committee on Rules;
    6. Two members appointed by the Governor;
12. Requires all appointed members of the governing board to have expertise in digital financial asset investments, and requires them to serve without compensation but be reimbursed for actual and necessary expenses incurred through service on the board.
13. Subjects the members of the Digital Asset Reserve Board to the Political Reform Act of 1976.
14. Assigns the members appointed by the Senate Committee on Rules, the Speaker of the Assembly, and the two members appointed by the Governor to three-year staggered terms. Grants the initial appointees of the Senate Committee on Rules and the Speaker of the Assembly two-year terms.
15. Requires any vacancy occurring during an unexpired term to be filled by appointment for the unexpired term.

EXISTING LAW:

1. Establishes the Unclaimed Property Law (UPL), which establishes when and how intangible property escheats to the state for the state to take custody of, but not own, unclaimed property. (Code of Civil Procedure Section 1500 et seq. All further statutory references are to the Code of Civil Procedure, unless otherwise specified.)
2. Provides that property received by the state pursuant to the UPL shall not permanently escheat to the state, and that it is the intent of the Legislature that property owners be reunited with their property. (Section 1501.5.)
3. Provides the procedure by which any digital financial asset held or owing by a business association escheats to the state if unclaimed by the owner for more than three years from either: 1) the date a written electronic communication to the owner is returned undelivered or by electronic mail, or 2) the date of the last exercise of an act of ownership interest by the owner in the digital asset account if the owner does not receive written or electronic communications from the holder or the holder does not have the means of systematically tracking or monitoring the nondelivery of those communications. (Code of Civil Procedure Section 1516.5.)
4. Provides that all tangible personal property and all intangible personal property, except as otherwise specified, that is held or owing in the ordinary course of the holder’s business and has remained unclaimed by the owner for more than three years after it became payable or distributable escheats to the state.
   1. Except where a statute establishes a different notice requirement for specific types of property, notice must be given as provided when the property is valued at $50 or more. The holder shall make reasonable efforts to notify the owner by mail or, if the owner has consented to electronic delivery, electronically; the notice shall be mailed not fewer than 6 and not more than 12 months before the time when the property becomes reportable to the Controller as unclaimed.
   2. The notice must be accompanied by a form which the owner can return to the holder to indicate that they are active; if the owner signs and returns the form, the escheat period recommences.
   3. A holder can provide a telephone number or electronic means for the owner to contact them in lieu of the form. (Section 1520.)
5. Requires every person holding funds or other property escheated to the state to file a report with the Controller as specified. (Section 1530.)
6. Requires every person filing a report of unclaimed property that will escheat to the state to, no sooner than seven months and no later than seven months and 15 days after the final date for filing the report, pay or deliver to the Controller all escheated property specified in the report. (Section 1532 (a).)
7. Requires the holder of any digital financial asset that escheats to the state, no more than 30 days after the final date for filing a report of unclaimed property, to transfer the exact digital financial asset type, private keys, and amount, unliquidated, to the Controller’s cryptocurrency custodian or as the Controller by regulation may designate. (Section 1532 (e).)
8. Authorizes the Controller to convert digital financial assets in its possession to fiat currency at prevailing prices by any method that the Controller may determine to be advisable. Requires the Controller to convert such digital financial assets no sooner than 19 months, but no later than 20 months, after the actual date of filing the report required by the holder of the person holding escheated property. (Section 1563 (c).)
9. Entitles a person making a valid claim for digital assets that have been delivered to the Controller and that remain in the custody of the Controller to receive the digital financial assets from the Controller. Entitles a person making a valid claim to receive the net proceeds received by the Controller from its sale if the digital financial assets have been converted. (Section 163 (c).)

FISCAL EFFECT: As currently in print this bill is keyed fiscal.

COMMENTS: California’s Unclaimed Property Law (UPL) governs the process by which unclaimed personal property escheats (or transfers) to the state. The goal of the law is to both reunite owners with their property and, pending such reunion, allow the state to utilize the property for the public benefit. Under the UPL, the state assumes possession and holds the property in perpetuity as a trustee for the rightful owner. (Harris v. Westly (2004) 116 Cal.App.4th 214, 219 (internal quotations omitted), Bank of America v. Cory (1985) 164 Cal.App.3d 66, 75.)

The UPL involves three distinct actors: the owner, or the person/entity with the rightful claim to the property; the holder, who is typically the business or financial institution who is in possession of the property that becomes abandoned; and the state controller who assumes custody of the unclaimed property from the holder and then administers claims, and manages the unclaimed property fund. The holder acts as a fiduciary and must report and remit property to the state when it is presumed abandoned. (Code of Civil Procedure Sections 1530-32.) Once in the controller’s custody, the property is either retained (in the case of tangible property) or liquidated and deposited in the Unclaimed Property Fund.

The UPL applies to a wide range of intangible personal property, including bank accounts, uncashed checks, wages, stocks, and insurance proceeds. Property is presumed abandoned if it remains unclaimed by its owner for a statutory dormancy period. Once the controller takes custody of the property it may earn income or interest from the property, which is deposited into the General Fund, while the principal remains subject to claim by the owner indefinitely. (Sections 1540, 1570.)

Last year SB 822 (Becker) Chap. 660, Stats. 2025, modified the UPL to incorporate digital financial assets (more commonly referred to as cryptocurrency). Pursuant to SB 822, digital financial assets escheat to the state after a three-year dormancy period – the same conditions and dormancy periods that apply to other forms of intangible personal property. Of particular relevance to the current measure, SB 822 required the Controller to hold escheated digital financial assets for at least 18 months, but no more than 20 months, at which point the Controller was authorized to convert the digital financial assets into fiat currency.

Here rises the impetus for the current measure. One of the unique features of digital financial assets is the incredibly wide range in value and volatile nature of value a single type of currency may have. Bitcoin, one of the most well-known cryptocurrencies, is also one of the most stable (although much more volatile than other traditional types of financial assets). Other types of cryptocurrency, such as Dogecoin, tend to be a significantly more volatile type of cryptocurrency. The volatility of cryptocurrency generally would tend to undermine one of the core tenets of the UPL – to allow the state to utilize unclaimed property to earn interest to bolster the state’s General Fund.

Acknowledging the potential boon for the state presented by more stable forms of cryptocurrency, as currently in print this bill would require the Controller, upon receiving the digital financial assets, to convert the assets into “high-quality” digital assets and deposit them into the “Digital Asset Reserve Fund.” This deviates from existing law in two ways – first, currently the Controller is permitted, but not required, to convert the asset. Second, existing law only authorizes conversion into fiat currency (or dollars).

The bill defines “high-quality digital asset” as a digital asset with an average market capitalization of at least one hundred billion dollars over the more recent 12-month period. This definition captures the more high-value cryptocurrencies that are more likely to provide a reliable return to the state. Given the ever-evolving nature of cryptocurrencies, Committee staff is not equipped to determine whether conversion to fiat currency or “high-quality digital assets” is more financially advantageous for the state and cedes that discussion to the Controller’s office. Nevertheless it seems reasonable to assume that requiring conversion of all forms of cryptocurrencies to those captured under the definition of “high-quality digital asset” could very well result in positive returns for the state.

The bill also authorizes the Controller to spend the digital financial assets in the Digital Asset Reserve Fund or sell them and spend the net proceeds from those sales to pay the reasonable costs associated with administering and managing the Fund. The bill requires the Controller to publish a quarterly report regarding the status of the assets in the Reserve Fund. The bill makes conforming changes to the notice businesses that hold abandoned digital financial assets are required to provide to the asset’s apparent owner.

Interestingly, the bill authorizes the Legislature, “through subsequent legislation” to direct the Controller to deposit 10 percent of the assets in the Reserve Fund into the General Fund. The Legislature does not require authorization to pass this type of legislation in the future, and this author is free to include such a provision in this current measure or introduce a bill doing the same in the future. Absent additional clarity as to the purpose of this provision, the author may wish to consider removing this seemingly unnecessary language.

Finally, the bill establishes the Digital Asset Reserve Fund Board and sets out the Board’s tasks as well as its makeup.

Author’s amendments. In addition to establishing an 18 – 20 month waiting period before allowing the Controller to convert digital financial assets into dollars, SB 822 also codified the rightful owner’s authority to reclaim either the digital financial asset itself or the value of the asset at any time, consistent with existing law. As with every form of unclaimed property, a rightful owner has the authority to reclaim their property at any time. In error, AB 2335 struck this authority. The author proposes amendments to reinstate the rightful owner’s authority to claim their property, modified slightly to reflect the current bill’s language. The new language would once again require the Controller to hold the escheated asset in its native form for at least 18 months, not to exceed 20 months. Existing law allows a person making a valid claim to retrieve either the digital financial asset from the Controller, or, if the asset has been converted to fiat currency, the net proceeds from the sale. Reflecting the bill’s modifications to existing statute to require conversion to high-quality assets, the author proposes to amend this provision to entitle a person to receive the asset in the following ways:

• If the asset has not yet been converted, then the asset in its native form;
• If the asset has been converted, then the Controller must revert the asset to its native form, equivalent to the amount escheated or convert the high-value asset to fiat currency at the prevailing price at the time a claim is determined valid;
• If the person requests the value of their asset in fiat currency, then the net proceeds received by the Controller from its sale.

The bill would read as follows:

(c) (1) Digital financial assets held by the Controller shall be deposited into the Digital Asset Reserve Fund, which is controlled by the Controller. The Controller shall convert digital financial assets in their native form to high-quality digital assets no sooner than 18 months, but no later than 20 months, after the actual date of filing of the report required by Section 1530. If a person making a valid claim does so before the Controller converts the digital financial asset to high-quality digital assets, the person shall be entitled to receive the digital financial assets in their native form. If the digital financial assets have been converted into high-quality assets, the Controller shall revert the digital financial asset to its native form equivalent to the amount escheated or convert the digital financial asset to fiat currency at prevailing prices at the time a claim is determined valid. If the person indicates that they want their digital financial assets in fiat currency, the person shall be entitled to receive the net proceeds received by the Controller from its sale.

The author also proposes the following conforming amendment regarding the notice a holder is required to provide an apparent owner when property in the holder’s possession may escheat to the state:

(E) Specify that digital financial assets will be immediately put into the Digital Asset Reserve Fund until the rightful owner is identified, and that the assets shall be converted into high-quality assets after the 18-month holding period.

ARGUMENTS IN SUPPORT: This bill is sponsored by Satoshi Action fund. In support of their measure they submit:

Currently, California manages public funds through traditional investment mechanisms that prioritize diversification and liquidity but limit exposure to emerging financial assets. Meanwhile, other states have begun exploring digital asset strategies, authorizing investments in high-market-capitalization digital assets or managing cryptocurrency through unclaimed property programs. These efforts demonstrate that digital assets are increasingly being considered as part of broader public finance strategies.

AB 2335 provides California with a responsible framework to explore this opportunity. By utilizing escheated digital assets through the unclaimed property program, the bill creates a Digital Asset Reserve Fund overseen by fiscal officers and financial experts to ensure prudent management. This approach allows the state to responsibly evaluate digital asset investments while protecting taxpayer funds and potentially increasing long-term returns.

[…]

AB 2335 reflects the kind of forward-looking, fiscally prudent approach we champion: one that enables California to capture value from digital assets already in state custody while maintaining robust safeguards and professional oversight.

REGISTERED SUPPORT / OPPOSITION:

Support

Satoshi Action fund (sponsor)

Opposition

None on file

Analysis Prepared by: Manuela Boucher-de la Cadena / JUD. / (916) 319-2334