California lawmakers recently passed a bill that would allow the state to ‘seize’ cryptocurrency in traders’ exchange accounts that have remained idle for three years. The new law has sparked debate among worried traders.

On June 4, the California House passed Assembly Bill 1052 or AB 1052. The bill stipulates that if users fail to show “ownership interest” towards crypto assets kept in their digital accounts for up to three years, then the state is allowed to seize the crypto kept in the account.

If it passes through the Senate vote, the bill would allow the State of California to seize crypto assets kept in a crypto exchange account that has been dormant for up to three years. Traders can indicate “ownership interest” by accessing their account, conducting transactions, depositing or withdrawing funds, and other related activities.

“The running of the three-year period under paragraph… ceases immediately upon the exercise of an act of ownership interest in the digital asset account,” read the bill.

However, the bill also added that before seizure, the state will first attempt to contact the account owner through written or electronic communication. If the owner fails to respond, then the “property held within a digital asset account escheats to the state three years after.”

Many traders have expressed concern over the bill, especially long-term Bitcoin (BTC) holders. Bitcoin advocate and author Jason Ai. Williams openly criticized the bill, claiming that the bill would rob traders of their Bitcoin if passed.

“Bill now heads to the Senate. Hilarious. California always finding ways to rob it’s citizens,” wrote Williams in his post.

Other traders have expressed concern over the bill, alleging that it would deter long-term holders. Some have also seen it as a sign to switch to self-custody instead of relying on crypto exchanges.

“So if you just hold and never sell then they can take it away?” asked one user.

“Wow. Just another reason for self custody,” said another user.

Misconceptions surrounding California’s latest crypto bill

Despite the backlash, many have also pointed out that the bill does not necessarily bring as much harm as some traders believe.

Policy Director at Satoshi Act Fund, Eric Peterson claimed many traders have misunderstood AB 1052. He explained that the bill abides to current property laws, which grants state ownership over unclaimed assets and updates it so that crypto assets remain in their original state.

This means that the state is not able to liquidate crypto assets seized from dormant accounts into fiat currency.

“What it does is update the unclaimed property laws so when your #Bitcoin is turned over as unclaimed property from an exchange, it stays in the form of Bitcoin rather than being liquidated,” said Peterson in his post.

“You can then get it back from California in Bitcoin,” he continued.

Previously, California lawmakers approved a bill that would allow the state to accept payments made in cryptocurrency. Assembly Bill 1180 suggested the creation of a pilot program that would run until Jan. 1, 2031, with full implementation scheduled to begin on July 1, 2026.