California is in the process of passing several bills designed to further its crypto regulation and acceptance within the state. The Golden State is aiming to establish itself as the most crypto-advanced state in the country by enabling government agencies to accept cryptocurrency payments, while also passing a law that would enable it to seize cryptocurrency that has been left dormant on crypto exchange accounts for more than three years.
Cryptocurrency Exchanges And Wallets
Although major crypto holders might use custodial services, most crypto buyers store their digital assets in hardware or software wallets. Modern wallets offer extensive functionality. They are not only used to store, send, and receive funds but can also be used to buy XRP instantly from centralized and decentralized exchanges.
Despite there being more options than ever before for crypto investors, many still hold their balances on crypto exchanges, despite this not being recommended.
The Crypto Exchange Risk
Crypto exchanges facilitate the conversion of fiat currency to cryptocurrency. They enable individuals to buy coins like Bitcoin and Ether and to sell them at a later date. However, because of the volume of crypto that exchanges deal with, they are somewhat prone to attacks from hackers and digital thieves.
The failure of Mt. Gox is a prime example. It was once the world’s biggest crypto exchange, but it lost an estimated 850,000 Bitcoins. In today’s money that’s just shy of $90bn.
State To Seize Cryptocurrency From Dormant Accounts
Users who hold their currencies on exchanges and live in California may also find their currency taken by another source – the state itself.
The California Assembly voted 68-0 to pass AB 1180, a bill that enables the state to seize any cryptocurrencies held in an exchange account that has been dormant for three years or more. There doesn’t need to be any suggestion of wrongdoing for the funds to be taken, either.
The Crypto Community Reaction
Experts have said that lawmakers are overreaching, with legal experts claiming that it would be incredibly complex to be able to seize assets in this way and for this reason. The crypto community has also pointed to the fact that money left in bank accounts or on forex exchanges is not seized in the same way. The only time funds are removed from these accounts is when there is suspected criminal activity.
Bitcoin Held As Bitcoin
One aspect of the bill that has been treated positively is the intention of seized assets to be retained as cryptocurrency and not exchanged for fiat currency. Previously, California and the rest of the US, including federal bodies, have been forced to sell off Bitcoin and other currencies when the funds are seized.
The Provision Of Data
The law would require exchanges to acquire a license to offer crypto exchange services to Californian residents. This would include the provision of transaction data to the state. Not only would this make it possible for the state to monitor accounts and determine any that hold currencies and are left dormant, but it would allow them to see individual’s trading history and payment receipts.
What Is A Dormant Account?
It would be relatively easy for crypto holders to avoid having their assets seized by logging into the wallet once every three years, but it would raise concerns as to what constitutes a dormant wallet. Would logging in be enough for the wallet to be considered active? Or would the account holder have to send or receive a payment to avoid having their assets taken?
California State Bitcoin Payments
The same bill would also enable the state to accept Bitcoin payments for any state payments under the Californian Digital Financial Assets Law. California wouldn’t be the first state to accept payments in this way. Colorado, Louisiana, and Florida have enabled the use of cryptocurrency payments for certain state obligation payments in recent years.
Bill AB 1180
If the bill is passed, it would go live by January 1, 2026, and it would likely lead to other states following suit. It also represents the latest in a long list of acts either being prepared or, in this case, passed, regarding cryptocurrency and its use.
The Crypto Capital Of The World
This has arisen as a result of President Trump’s stated desire to make the US the crypto capital of the world. Despite having mooted various changes and improvements for the crypto community, who donated large sums to his Presidency run in 2024, Trump hasn’t passed many executive orders or bills of his own to really change things. However, it has become apparent that states and other lawmakers have eyed opportunities, and we are likely to see yet more bills and laws passed in the coming years.