Virginia signed a law that requires unclaimed digital assets to be transferred in-kind under state custody rules ensuring dormant crypto will be held in its original form for a year before a sale.
Dormant digital assets to be held in place of liquidation
Virignia Spanberger has signed legislation, updating the state’s need to manage unclaimed property. The updates says that the state’s existing framework to cover digital assets, which require that dormant cryptocurrency be held “in-kind”, rather than liquidating them into cash for at least one year after being transferred to state custody.
The law will be reportedly taking effect on July 1, 2026. Coinbase chief Legal Paul Grewal Heralded, finds the act a ‘good news’.
Under HB 798, a law meant for ‘Virginia’s Disposition of Unclaimed Property Act’, crypto assets are considered abandoned after five years of account inactivity. Once transferred, the state treasure is not allowed to sell those assets under any circumstances during the first year.
This restriction is intended to prevent owners from facing unintended tax liabilities or losing potential profits due to premature liquidation, especially if asset prices increase later on. But the real question is if the law is really meant to protect the users or the asset.
The bill, introduced by Delegate C. E. Cliff Hayes Jr., had passed through the legislature with difficulties, clearing the House in a 96 to 2 vote and the Senate unanimously before reaching the governor’s desk.
The measure also outlines how different types of custodians must handle dormant digital assets. Entities with full access to private keys are required to transfer crypto holdings to the state in their original form.
The senior director at the crypto firm Wincent, Paul Howard told that media that, “I believe this is positive for the industry as it helps lay out procedures and recognise digital assets value,” as he mentions that this is a step closer to defining State custody of unclaimed custodial assets instead of State’s control of private assets.
“This likely helps strengthen Virginia as a State where corporations and individuals can feel confident in domiciling their holdings or estates,” he said.
Custodial duties to be seen through the new lens of regulations
According to the Law, holders with full private key access must transfer their dormant assets to the state while those with partial access should retain until they can make a full transfer of their portfolio.
It comes down to a long-standing legal concept called escheatment, the idea that if property appears abandoned and the owner can’t be reached, then the state steps in as a custodian of last resort.
The bill is also protecting holders facing technical concerns where the user may face issues with liquidation. In such cases, they are asked to notify the administration in writing in case they “reasonably believe it cannot liquidate digital assets. The state is said to look into the cases individually before providing the alternative course of actions.
One added advantage for the owners who file a claim within the given period is that they are entitled to the current market value of the assets instead of its value at the time of the state’s claim.
The legislation stated that the assets in inactive accounts for a period of over five years, to be considered abandoned, though any user activity resets the dormancy period.
The five-year abandonment timeline “seems a reasonable” tenure “that will improve trust in crypto,” Howard from Wincent noted.
Five-year dormancy trigger, market-value claims aim to boost investor protection
In a similar move, California Governor Gavin Newsom signed Senate Bill 822 last October, to forbid the forced liquidation of unclaimed crypto and allowing conversion only after 18 to 20 months.
Under the law, claimants can recover either their original digital assets or the equivalent sale proceeds.
