§ 1568.Selection Criteria For Custodians of Escheated Digital Financial Assets

Cryptocurrency and other digital financial assets that escheat to the state need specialized handling that an ordinary storage vault can't provide, and Section 1568 gives the Controller the authority to bring in outside expertise. The Controller may select one or more custodians to manage and safeguard digital financial assets that have escheated, but any entity chosen for that role has to hold a valid license from the Department of Financial Protection and Innovation under the Financial Code's digital financial asset licensing chapter.

In choosing among licensed candidates, the Controller weighs a set of practical factors: how securely the custodian stores the assets against unauthorized access, whether it can manage the private keys needed to transfer or transact with the assets when the time comes, its track record handling digital financial assets, its compliance with applicable federal and state rules, how regularly it reports back to the Controller on the assets' status and value, and its processes for reuniting owners with their property, including keeping contact records current and sending timely notifications. The Controller also considers whether the custodian qualifies as a “financial institution” under the federal Bank Secrecy Act framework, which brings its own anti-money-laundering obligations, along with any other factor the Controller considers relevant.