California has advanced a controversial bill that would allow the state to seize bitcoin and other cryptocurrencies left idle on exchanges for three years—a move critics are calling nothing short of legalized theft.

Passed by the State Assembly, the bill is now heading to the Senate, where it could soon become law.

This marks a sharp expansion of California’s unclaimed property laws, traditionally used to claim dormant bank accounts or uncashed checks. But now, digital assets are in the crosshairs—and many in the crypto world see this as an alarming overreach by the state.

Under California’s existing unclaimed property framework, financial institutions are obligated to turn over assets after three years of “inactivity.” This includes no deposits, withdrawals, or any communication from the account holder.

Once the state claims it, the property is held in trust and must be reclaimed by the rightful owner through a bureaucratic and often sluggish process.

The new bill extends this logic to cryptocurrency, allowing the state to confiscate idle bitcoin from private exchange accounts. These assets could be liquidated into U.S. dollars and held by the state—even if their rightful owners are simply long-term holders practicing “HODL” strategy.

Critics argue this is not about protecting consumers but about quietly tapping into a massive pool of digital wealth under the guise of policy. As crypto lawyer Jason Brett told Roll Call, “You’re talking about property that wasn’t lost or forgotten—just not touched. That’s not abandonment. That’s investing.”

As the bill moves to the California Senate, crypto advocates and privacy rights groups are mobilizing. The Blockchain Advocacy Coalition has already signaled its opposition, calling the bill a “Trojan Horse for asset confiscation.”

The bill’s passage could set a disturbing precedent, potentially inspiring similar actions in other states under the banner of consumer protection—but in reality, critics argue, it’s a cash grab by a cash-strapped state.

For now, crypto holders in California are being warned: move your coins or lose them. Engaging in simple activity—such as logging in or initiating a microtransaction—may reset the dormancy clock. But the bigger question looms: Should a government have the right to seize property simply because it was untouched?

If this bill becomes law, the answer in California will be a resounding—and deeply controversial—yes.