NY State Plans to Rewrite Laws to Allow It to Seize ‘Abandoned’ Bitcoin
State representatives are brushing the dust off centuries-old legal doctrines on abandoned property and applying it to Bitcoin. A new draft law would allow the state to seize Bitcoin which has no owner.
Escheatment laws are nothing new. Dating back to feudal England, they allow for property to be seized if it is ‘unowned’ and ‘unclaimed’ by anyone. This can happen due to sudden death with no will, a disappearance, or if a property was abandoned for any reason whatsoever.
However, these centuries-old escheatment laws are now under consideration to be updated. Currently, all 50 states have escheatment laws on the books, but almost none have any amendments which specify ‘unclaimed property’ as it relates to cryptocurrencies. This could soon change though, as states realize they might be an untapped source of revenue.
A New Proposal
A new bill proposed in the New York State Assembly would allow the government to liquidate unclaimed cryptocurrency assets and transfer them to state coffers. According to the Unclaimed Property Professionals Organization, an organization lobbying for the bill, as cryptocurrencies “more unclaimed property issues will likely arise.”
According to the proposal, unclaimed virtual currencies will be considered “abandoned” and will be moved to the NY State Comptroller’s Office. It will be sold on exchange and all proceeds will go into the state’s escheatment fund.
Other states, like Illinois, Colorado, and Utah, have already taken similar steps in defining virtual currency as property.
Legal Risks Persist
Although the draft bill is just an expansion of existing escheatment laws, some crypto-analysts have pointed out the significant risks. For example, if a state was to seize unclaimed crypto-assets, it would be immediately converted to cash. If the owner wishes to recover the abandoned asset, they would only receive the price sold at its liquidation, not its appreciated price.
It’s also unclear how ownership of liquidated cryptocurrencies can be determined. Since ownership is validated by the network, selling it for fiat currency would cause further complications.
Overall, the proposal poses more questions than it resolves. Although just a draft, we can expect to see escheatment laws be updated in other states as cryptocurrencies are more legitimized.
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