Unclaimed property: digital financial assets.

The definition of 'Digital Asset Reserve Fund' was changed. It no longer consists of escheated digital financial assets deposited directly into the fund. It now consists only of high-quality digital assets purchased with interest, earnings, and investment income credited to the Digital Asset Claims Reserve Account.

The notice requirement in Section 1516.5 was simplified. The old version required certified mail (return receipt requested) when the holder had a mailing address, with electronic notice as an additional option. The new version makes electronic notice the primary required method and removes the certified mail requirement entirely. Electronic notice applies regardless of whether the apparent owner has consented to electronic service.

The legislative digest was restructured to remove a separate paragraph describing the creation of the Digital Asset Reserve Fund and the Controller's conversion of escheated assets into high-quality digital assets. The description now presents a single unified mechanism: escheated assets are held in native form for 18-20 months, then liquidated to fiat currency, with net proceeds going to the Digital Asset Claims Reserve Account.

Minor text corrections and formatting changes throughout, including renumbering of page references (95 to 94) and indentation adjustments. Two apparent typos were introduced: 'person person' in Section 1532(d) and 'possess possesses' in Section 1532(e)(2).

The document was reformatted from a traditional legislative print format (with line numbers, page headers/footers, and amendment dates in the header) to a web-based rendering with navigation elements. No substantive policy language was changed.

All staking-related provisions were removed, including definitions of 'staking,' 'staking rewards,' 'slashing,' and 'qualified staking service provider,' as well as the Controller's authority to engage staking providers, staking reward allocation, unstaking procedures for claimants, slashing loss protections, and staking risk management policies.

The act description was updated to reflect that the bill now amends Section 1532 and adds both Sections 1563.5 and 1564.6 (previously only 1563.5 was added).

A new Digital Asset Claims Reserve Account (Section 1564.6) is created as a segregated account within the State Controller. Escheated digital financial assets that are not claimed within the 18-20 month holding period are liquidated and net proceeds deposited here. The Treasurer invests these funds, and all interest and earnings are transferred quarterly to the Digital Asset Reserve Fund.

The treatment of escheated digital financial assets changed from being deposited directly into the Digital Asset Reserve Fund and converted to high-quality digital assets, to being held in native form for 18-20 months and then liquidated to fiat currency with net proceeds going to the Digital Asset Claims Reserve Account.

A new Section 4 amending Code of Civil Procedure Section 1532 requires holders to transfer digital financial assets unliquidated (including private keys) to the Controller's cryptocurrency custodian within 30 days after the final report date, and sets a payment window of 7 to 7.5 months after the final report date.

Electronic notification requirements were strengthened. Holders must use the owner's preferred contact method plus at least two of: push notifications, text messages, or email. The certified mail requirement in subdivision (e) now applies regardless of asset value or whether the owner consented to electronic service.

The definition of 'Digital Asset Reserve Fund' was expanded to include high-quality digital assets purchased with interest, earnings, and investment income from the new Digital Asset Claims Reserve Account. New definitions for 'Digital Asset Claims Reserve Account' and 'Net proceeds' were added.

Claimant rights were modified: a person making a valid claim before disposition is now entitled to receive assets in native form, fiat currency, or cash if the digital financial assets were already liquidated (the Assembly version only offered native form or fiat currency).

Four new definitions added: 'Qualified staking service provider' (a financial or technology provider meeting board-established criteria including operational experience, cybersecurity, insurance/bonding, and legal compliance), 'Slashing' (forfeiture of staked assets due to validator misconduct), 'Staking' (committing assets to a blockchain consensus mechanism for rewards), and 'Staking rewards' (digital assets received as compensation for staking).

The Controller is now authorized to engage one or more qualified staking service providers to stake digital financial assets in the fund, whether in native form or as high-quality digital assets. The Digital Asset Reserve Fund Board must prioritize direct protocol-level staking over methods introducing intermediary smart contract risk. Until the board adopts its initial staking policy, the Controller may already engage a provider.

New claim procedures for staked assets: the Controller must notify the claimant in writing within 5 business days of verification that assets are staked, direct the provider to initiate unstaking within 3 business days, and return assets within 60 calendar days of verification or 5 business days after unstaking completion (whichever is later). Claimants are not entitled to any share of staking rewards.

The Digital Asset Reserve Fund Board's investment policy duties now explicitly include staking policies specifying eligible assets, approved staking methods and protocols, maximum staking percentages, qualified provider selection criteria (prioritizing insurance/bonding adequacy), and risk management requirements.

Owner notice requirements expanded to inform holders that digital financial assets in the fund may be staked through a qualified provider to generate network participation rewards, and that returning assets to a verified claimant may require completion of an unstaking process.

All staking rewards derived from fund assets are designated as property of the Digital Asset Reserve Fund. The Controller must use staking rewards to purchase high-quality digital assets for the fund, creating a self-reinforcing growth mechanism.

Slashing losses are borne by the Digital Asset Reserve Fund, not by verified claimants. The board must establish risk management policies including provider selection criteria, validator diversification requirements, and reserve adequacy standards to protect against slashing losses.

The Controller's quarterly report must now include: the amount and type of each asset currently staked, the provider used, the staking method and validator/protocol; staking rewards earned during the period and cumulatively; high-quality assets purchased with rewards; and any slashing events including amounts lost and providers/validators involved.

Section 1563(c) was substantially rewritten. The introduced version allowed the Controller to convert digital financial assets to fiat currency at prevailing prices. The amended version requires the Controller to convert them from native form into high-quality digital assets (not fiat currency) between 18 and 20 months after the holder files its report.

New provision clarifying that a person who elects to receive digital financial assets in fiat currency is entitled to the net proceeds from the Controller's conversion of those assets.

The escheat notice required under Section 1516.5(g)(3)(E) now must also inform owners that their assets will be converted into high-quality assets after the 18-month holding period, in addition to stating they will be placed in the Digital Asset Reserve Fund.

New claimant protection: a person who makes a valid claim before the Controller's conversion is entitled to receive the digital financial assets in their native form or in fiat currency. If conversion has already occurred, the Controller must either revert the assets to native form equivalent to the amount escheated, or convert them to fiat currency at the prevailing market price at the time the claim is determined valid.

Definitions in Section 1501 were re-lettered to fix a duplicate subdivision (d) that appeared in the introduced version. Page numbers shifted from 99 to 98 throughout due to text additions.