Last month, a cross-functional group of Sovos unclaimed property experts—including folks from product development, product marketing, managed services, our general counsel’s office, and the consulting team—traveled to Tucson, Arizona to the Unclaimed Property Professional Organization’s annual conference. We spent the week diving deep into all things unclaimed property.
There was one topic that kept coming up: digital assets.
Whether it was NFTs, crypto wallets, sports betting accounts, or the rewards creators earn from social media platforms, digital property raised big questions. How should it be categorized? When is it considered abandoned? Who owns it? Who has access to it? And, maybe most important to holders – what are states doing about it?
Spoiler alert: They’re starting to act. The inclusion of digital assets in unclaimed property laws is becoming more common, and it’s changing the game for holders and owners alike.
Let’s break down what’s happening and what it means for all of us trying to stay ahead of the curve.
Reminder, unclaimed property = consumer protection
Unclaimed property laws are all about consumer protection. If a company is holding onto money or property that belongs to someone—but hasn’t had contact with that person in a certain number of years—it’s required to report and remit that property to the state. The goal is to reunite the owner with their property.
Traditionally, this applied to tangible items like uncashed checks, forgotten savings accounts, and unused rebates, etc. But as more of our lives—and our money—shift online, regulators are starting to rethink what “property” means in the modern era.
Enter digital assets: From crypto to creator rewards
Digital assets are a broad category. We’re talking about:
- Cryptocurrencies like Bitcoin and Ethereum
- NFTs (non-fungible tokens) representing digital art or collectibles
- Balances in sports betting or gaming apps
- Creator rewards on platforms like TikTok or YouTube
These assets don’t live in a safe deposit box or a bank account. They exist entirely in cyberspace, and they’re often managed by tech platforms or stored behind cryptographic keys that only the owner controls. So, what happens when these assets sit idle? When an account goes untouched for years, or a wallet gets locked away forever?
States are starting to say: That’s unclaimed property and it’s escheatable.
What states are actually doing
Two states leading the charge are Delaware and Illinois. Both have updated their unclaimed property laws to formally include digital assets—but have limited their scope to virtual currencies.
Delaware’s take
In 2021, Delaware passed legislation that defines virtual currency as property and requires holders to liquidate it if it becomes abandoned. After five years of inactivity, companies must:
- Liquidate the crypto
- Report the property
- Remit the value (in U.S. dollars) to the state
Importantly, the law makes clear that any increase in the value of the virtual currency after liquidation would not impact the value of the property that was remitted to the state as unclaimed. The risk associated with potential loss of value associated with liquidated accounts and the potential for related lawsuits is reason for Holders to be proactive about managing the digital portfolios held in their care.
Illinois follows suit
Illinois did something very similar. Their updated law uses the same five-year dormancy period and defines virtual currency in a nearly identical way. Holders must liquidate and remit the proceeds within 30 days prior to filing their unclaimed property reports.
So, if you’re a business holding customer crypto (think exchanges, fintech apps, digital wallets), your compliance obligations may have just expanded.
Why this matters for holders (like financial platforms, exchanges, betting apps):
Organizations are going to need to start tracking digital assets more closely. That means:
- Monitoring for dormancy
- Ensuring that your organization has complete owner information that will enable you to contact them to encourage them to re-engage with their accounts to protect them from escheatment
- Developing workflows for liquidating digital assets
- Updating escheatment policies and customer disclosures
- Getting your business systems ready to handle due diligence responsibilities and reporting requirements
That’s no small feat, especially with the volatility of crypto markets and the added security concerns that come with handling digital wallets.
What’s Next? More States, More Complexity
The general consensus at the Tucson conference was this: We’re just getting started.
Digital assets aren’t going away. In fact, as more people embrace Web3 and decentralized finance, the volume of digital property will only grow.
That means more states are likely to follow Delaware and Illinois. We expect to see:
- More legal definitions of virtual currency, NFTs, and digital rewards
- Shorter dormancy periods for online platforms
- Expanded enforcement efforts targeting noncompliant holders
- Increased interest from auditors, especially in crypto-heavy industries
What we heard again and again in Tucson is that digital assets are challenging, but they’re not exempt.
At Sovos, our team is staying on top of these changes to help businesses navigate the risks and stay compliant. The digital economy doesn’t fit neatly into old frameworks—but that doesn’t mean it’s out of scope.
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