Understanding the Intersection of Cryptocurrency and Unclaimed Property Laws

Unclaimed Property Compliance in Fintech: Key Considerations

For fintech companies, unclaimed property compliance presents unique challenges due to the digital and decentralized nature of their operations. Unlike traditional financial institutions, fintech firms often operate across multiple states and global markets, necessitating a nuanced approach to compliance. Key areas of concern include:

• Inactive Cryptocurrency Wallets and Trading Accounts: The evolving classification of digital assets under unclaimed property laws requires firms to monitor dormant wallets and unclaimed cryptocurrency holdings. Many jurisdictions have yet to establish clear guidelines for treating cryptocurrencies under escheatment laws, creating uncertainty. As regulatory clarity improves, companies must proactively track inactive digital wallets, abandoned crypto assets, and unclaimed blockchain-based holdings to ensure compliance.
• Trading Platforms: Inactive trading accounts and unclaimed dividends necessitate precise tracking and reporting. Investors who fail to access or utilize their accounts over an extended period may leave behind unclaimed funds, dividends, or securities. Trading platforms must establish robust compliance mechanisms to monitor user inactivity, enforce dormancy rules, and report unclaimed assets in accordance with state laws.
• Maintaining Assets Under Management (AUM): Many holders must liquidate cryptocurrency and report the funds as cash (fiat) to the state. By liquidating the virtual currency, owners could potentially miss out on future price value increases. Fintech companies should prioritize maintaining high AUM by proactively reaching out to account holders before assets become dormant, helping to avoid escheatment, stay compliant, and potentially strengthen customer relationships and revenue.

The Risks of Non-Compliance

Failure to comply with unclaimed property regulations can lead to significant financial and operational consequences, including:

• Regulatory Audits and Enforcement: State authorities actively pursue compliance through audits, which may result in substantial financial liabilities. Given the lucrative nature of unclaimed property enforcement, states have become more aggressive in identifying non-compliance. Fintech firms operating across multiple jurisdictions are particularly vulnerable to multi-state audits, which can result in costly settlements and increased scrutiny. Unclaimed property audits can often span several years, tying up valuable resources during the process.
• Penalties and Interest: Non-compliance can lead to costly fines, impacting financial performance and operational budgets. Penalties and interest may be imposed for failing to report unclaimed property, missing deadlines, or incorrectly filing reports, which can result in significant financial strain for non-compliant companies. Some states even have criminal penalties outlined in their statutes, though they are rarely enforced.
• Reputational Risk: Investors, stakeholders, and clients may lose confidence in a firm that fails to manage unclaimed assets effectively. In an industry built on trust and security, negative publicity surrounding regulatory infractions can damage brand credibility and deter potential investors or customers from engaging with the company.
• Operational Disruptions: Without an established compliance framework, organizations may experience inefficiencies and increased regulatory scrutiny. Investigations, audits, and legal proceedings related to unclaimed property compliance can drain internal resources and divert focus from core business functions, ultimately affecting long-term growth and profitability.

DMA’s Expertise in Unclaimed Property Compliance

DMA offers specialized solutions tailored to the unique needs of fintech companies, with a strong emphasis on unclaimed property compliance and risk mitigation. In addition to our advisory capabilities, DMA provides fully managed and outsourced unclaimed property compliance services, allowing fintechs to offload the operational burden while ensuring full regulatory alignment. Our comprehensive service includes:

• Managed/Outsourced Compliance Services: DMA serves as an extension of your team, managing the entire unclaimed property lifecycle—from due diligence and escheatment reporting to state correspondence and audit defense—so your internal resources can stay focused on growth and innovation
• Regulatory Compliance Advisory: We closely monitor changes in the virtual currency and fintech regulatory landscape, offering expert guidance to help clients navigate complex compliance requirements
• Risk Assessment and Audit Support: Our specialists conduct thorough risk assessments and provide strategic audit support to reduce liability and exposure
• Data Management and Reporting Automation: DMA helps firms streamline key processes, including data collection, dormancy tracking, and automated reporting, ensuring accuracy and efficiency
• Voluntary Disclosure Agreements (VDAs): We assist companies in enrolling in and completing VDAs, helping to minimize penalties, reduce audit risk, and align with state compliance expectations
• Customized Compliance Programs: Our tailored solutions are designed to integrate seamlessly with fintech operations, enabling proactive risk management, operational scalability, and ongoing regulatory compliance.

Conclusion

Unclaimed property compliance is a strategic imperative for fintech companies seeking to maintain regulatory integrity and operational efficiency. Given the complexities of digital assets, multi-jurisdictional regulations, and increasing state oversight, finance professionals must adopt a proactive approach to compliance. DMA’s expertise enables firms to navigate the challenges of unclaimed property compliance, mitigate financial risk, and sustain long-term business success.

Contact DMA today to learn how our solutions can help your organization achieve and maintain unclaimed property compliance.