New York Requests Delay in Reporting Unclaimed Virtual Currency

In an interesting development, New York has requested that companies hold off on reporting unclaimed virtual currency this year. This news comes in the wake of a newly enacted law requiring holders to report and remit unclaimed virtual currency owned by New York residents.

Virtual currency is the latest property type to become a target of the states. Several states have added virtual currency to the definition of “property” in their unclaimed property laws. Others have gone further and enacted specific provisions dictating when such property is presumed abandoned.

The state of New York joined the party on November 22, 2022, when it enacted a new law addressing virtual currency. The new law became effective on the same date. The law requires banking organizations, or any other entities engaged in the virtual currency business, with unclaimed virtual currency as of June 30 to report such property to the state by November 10 of each year. Virtual currency is presumed to be unclaimed after five years with no activity or contact with the owner. Unlike other states’ laws addressing virtual currency, New York law does not require a holder to liquidate the property before remitting it to the state. Instead, the expectation is that the virtual currency would be remitted in its original form to a custodian retained by the state.

Recognizing that holders need to comply with the new law this November and seeing that no instructions appear on New York’s website or in the handbook instructing holders how to remit virtual currency in its present form, Sovos reached out to New York to get some guidance. During a phone conversation with Kelly Kuracina, the Assistant Bureau Director of the Office of Unclaimed Funds, Sovos learned that the state’s attorney recently issued an opinion regarding the application of the new law addressing virtual currency. It is the opinion of the New York attorney that the new law can only be applied prospectively. According to Ms. Kuracina, this position means that the dormancy period on virtual currency cannot begin to run on virtual currency until the effective date of the new law. In other words, the dormancy periods on such property only began to run on November 22, 2022. As such, virtual currency owned by a New York resident cannot be presumed abandoned until November 22, 2027, and would not be reportable until 2028.

The Office of Unclaimed Funds is currently assessing the validity and impact of the attorney’s opinion.  Indeed, because the matter is still under review, Ms. Kuracina made it very clear that New York will not require the reporting of virtual currency this year. Instead, the expectation is that holders will identify abandoned accounts, send due diligence, but hold off on reporting anything to the state. In the meantime, companies looking to report liquidated funds are welcome to send those to the state. Written guidance consistent with the information provided by Ms. Kuracina will be posted to the New York Office of Unclaimed Funds website in due course.