Cryptocurrency Impact on Unclaimed Property Recovery

The rise of cryptocurrency is fundamentally complicating the management and recovery of unclaimed property. For companies that hold or custody digital assets, the intersection of traditional escheatment laws — which were designed for bank accounts and paper securities — and the decentralized nature of blockchain has created a complex compliance environment.

Here is how cryptocurrency is impacting the landscape of unclaimed property recovery.

1. The Challenge of “Forced” Liquidation

In traditional unclaimed property, a company reports dormant assets to the state, and the state assumes custody. However, most state treasury systems are still not equipped to hold cryptocurrencies in their native, blockchain-based form.

• The Impact: Many states mandate that holders (like exchanges or fintech firms) liquidate digital assets into fiat currency (USD) before remitting them to the state.
• The Consequence: This creates a significant risk for the original owner. If the asset is liquidated, the owner loses the potential for future capital appreciation. If they come forward years later to claim their property, they receive only the cash value at the time of liquidation, rather than the original assets that might have increased in value significantly.

2. A Shift Toward “In-Kind” Custody

To address the unfairness of forced liquidation, some states are beginning to modernize their laws to allow or require “in-kind” holding of digital assets.

• New Developments: For example, as of April 2026, Virginia has enacted a framework that requires the state to hold dormant cryptocurrency in its original, native form for at least one year before any potential sale. This offers owners a better chance to recover the actual assets rather than a depreciated cash equivalent.
• Operational Burden: While this is better for the owner, it places a heavier burden on the “holder” (the company) to securely manage, report, and transfer these tokens to state-controlled wallets, which requires sophisticated blockchain infrastructure and security measures.

3. Increased Complexity in Defining “Dormancy”

Determining when an account is truly “abandoned” is notoriously difficult in the crypto space.

• Ambiguous Triggers: Traditional unclaimed property laws look for “lack of activity.” In crypto, does a periodic airdrop, staking reward, or passive balance increase constitute “activity” that resets the dormancy clock? States are currently struggling to define what constitutes an “indication of interest” from an owner.
• Identity Gaps: Because many crypto interactions are pseudonymized or rely on private keys rather than government-linked identities, companies often struggle to match dormant assets to a specific, reachable owner, making the required “due diligence” outreach before escheatment much harder to perform.

4. Risks for Companies Acting as Holders

For businesses that provide custodial services or hold crypto on behalf of others, the current environment is a high-risk compliance frontier:

• Regulatory Fragmentation: With no federal standard, companies must navigate a patchwork of state-level laws. Some states have specific crypto statutes, while others apply generic “catch-all” property codes (like “miscellaneous intangible property”), leading to inconsistent reporting requirements.
• Record-Keeping: Companies must maintain auditable trails of their due diligence efforts to prove they attempted to locate owners. If a company fails to properly identify, report, or liquidate (if required) these assets, they face potential audits and penalties.

Summary of the Current Environment

Feature	Traditional Property	Cryptocurrency Property
Custody	Easy for states to hold	Often requires specialized digital wallets
Liquidation	Standard (liquidate to cash)	Increasingly controversial/forced liquidation
Valuation	Stable	Highly volatile
Recovery	Predictable (cash value)	Risk of lost upside due to liquidation

In short, cryptocurrency is forcing state governments and corporations to move away from rigid, legacy-based systems toward more flexible, tech-forward approaches. While the trend is moving toward protecting the original asset (in-kind holding), the current reality for most companies remains a complex, manual, and high-stakes compliance process.