POLICY RECOMMENDATIONS Fiscal Health

Policy Recommendation 7:

State policymakers may carefully consider whether existing state laws properly account for unclaimed or abandoned property in the cryptocurrency and blockchain arena.

It has been such an enriching experience learning more about blockchain technology, cryptocurrencies and the potential implications of unclaimed and/or abandoned property in cryptocurrency. As we evolve as a country, it is critical that we, state policymakers, take a bipartisan approach in putting forth sound legislation that will effectively regulate this arena and better protect our neighbors, constituents and their interests. I look forward to further researching this technology and exploring the opportunity for future legislation in the upcoming session.”

The Fiscal Health Subcommittee approved this recommendation to align cryptocurrency with regulation placed on similar assets. The subcommittee noted that unclaimed and abandoned property laws differ in each state and could result in varying courses of action.

All 50 states and Washington, D.C., have unclaimed property or escheat laws.1 These laws require those in possession of unclaimed property to report it, and once abandoned, to remit it to the state. State law differs in the length of time that property — including assets — can remain unclaimed before they are determined “abandoned.” After it has been turned over to the state, the owner of the funds can recover it directly from the state.

The manner in which cryptocurrency fits in escheat laws is more complex. Some states have required the virtual currency to be liquidated once handed over to the state.2 Others have sought ways a holder can transfer cryptocurrency to the state without liquidating. States will have to determine how the world of cryptocurrency and blockchain best fit with unclaimed or abandoned property laws.

State Examples

Illinois Senate Bill 338(2021) defines virtual currency to be abandoned five years after the last indication of interest. It also requires holders of the abandoned virtual currency to liquidate it before remitting to the state. If an owner were to recover the abandoned property, that owner would receive the value of the asset after liquidation.

New York Senate Bill 9360 (2022), currently in the New York Senate, would define unclaimed virtual currency as abandoned property. Setting this definition would allow the state’s abandoned property laws to apply to cryptocurrency. Additionally, New York introduced a bill that would allow holders to remit virtual currency without liquidating.3 This is seen as beneficial to the property holders as they allow holders to recoup the full value of their asset once recovered.

Additional Resources

ƒ U.S. Department of the Treasury: Unclaimed Assets — https:// www.fiscal.treasury.gov/unclaimed-assets.html

ƒ Wisconsin Legislative Reference Bureau: Cryptocurrency and Blockchain-Background and Regulator Approaches — https:// cointhinktank.com/upload/Cryptocurrency%20and%20Blockchain%20-%20Background%20and%20regulatory%20approaches%202017.pdf

Endnotes

1 Giovannini, M. (2022, April 12). Looking at Unclaimed Property Issues in Cryptocurrency. Retrieved November 8, 2022, from Bloomberg Tax: https://news.bloombergtax.com/ tax-insights-and-commentary/looking-at-unclaimed-property-issues-in-cryptocurrency

2 Ibid.

3 Butterbaugh, K. (2021, Sept. 8). 3 Ways Unclaimed Property Law Clashes with Virtual Currencies. Retrieved November 8, 2022, from Payments Journal: https://www.paymentsjournal.com/3-ways-unclaimed-property-law-clashes-with-virtual-currencies/