The New York State representatives have drafted a new law allowing the state to seize unclaimed and abandoned Bitcoin, much like the laws on abandoned property. The new bill proposed in the New York State Assembly allows the government to liquidate unclaimed cryptocurrency assets and transfer them to state coffers.
Escheatment laws, derived from as early as the times of feudal England, allow for property to be seized if it is ‘unowned’ and ‘unclaimed’ by anyone. It can be caused by sudden death with no will, disappearance of a person, or any other reason.
In today’s scenario, these escheatment laws require to be revised. When looked from the perspective of cryptocurrencies, the proper application of these laws can be useful for the stated as they might be an untapped source of revenue.
The Unclaimed Property Professionals Organization, an industry group backing the law, said that as more people and companies recognize bitcoin and other cryptocurrencies as legitimate forms of payment, “more unclaimed property issues will likely arise.”
Other states, like Illinois, Colorado, and Utah, have already taken similar steps in defining virtual currency as property.
Although the proposed bill is just an extension 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.
Another problem that arises is the ownership of the liquidated cryptocurrencies. Since ownership is validated by the network, selling it for fiat currency would cause further complications.
The proposal comes bearing a number of problems. Being a draft it needs much more amendments. However one can very well expect such escheatment laws to be updated in other states as well, as cryptocurrencies get legitimized.