RImagine the following common scenario.
A consumer overpays his utility company. The utility company issues a refund check for the overpayment, but the check is never cashed. What happens to that money? Under state unclaimed property statutes, the money is presumed abandoned after a certain period of time, and, consequently, the utility company must send the money to the appropriate state agency. The state maintains custody until the consumer claims the funds.
Unclaimed property statutes apply to any type of property belonging to an owner (an “Apparent Owner,” in unclaimed property parlance) but held by a third party (a “Holder”). Abandoned bank accounts, uncashed traveler’s checks, unclaimed dividends, unclaimed wages: there’s a special rule for how each type of property should be treated.
How about virtual currency, though?
Until recently, in a lot of states, the answer to that question was not entirely clear. Most states defined “property” subject to the unclaimed property statute rather broadly but not so broadly as to unambiguously include virtual currency. The Revised Uniform Unclaimed Property Act changes that. The model uniform law defines property to include “property referred to as or evidenced by … virtual currency….”
So that means all the Dogecoin that you bought in 2016 and stored in a custodial wallet might be presumed abandoned if you have not expressed interest in it over the last few years.
Assuming a state’s unclaimed property law applies to virtual currency, we are still left with the question of how holders of abandoned virtual currency are supposed to report it to the state. Will states open up wallets for every single possible altcoin? The administrative and security challenges make this seem like an unlikely solution. Perhaps holders will be expected to liquidate the abandoned coins and transfer the proceeds to the state? That certainly seems easier to administer, at least for the states. Virtual currency seems like a type of property that is in desperate need for special rules by the state treasurers.
A few states have adopted versions of RUUPA. Several others are considering it for the 2019 legislative session. To stay updated on all the legislative changes, check out our State Blockchain and Virtual Currency map. If you haven’t already signed up to receive blockchain updates, click here.