3.8M BTC at Risk as Congress Battles Police Lost-and-Found Claims

Woofun AI reports that a legislative conflict has emerged over 3.8M dormant BTC, pitting federal efforts under the CLARITY Act against state-level police lost-and-found claims initiated by Noah Doe. The core dispute centers on whether years of wallet inactivity constitute abandonment, a question now being addressed through federal preemption attempts.

Section 20216 of the latest CLARITY draft explicitly states that a self-custodied digital asset cannot become abandoned, unclaimed, or forfeited.

Furthermore, such assets are shielded from adverse possession or finder's title claims solely based on the owner's failure to move funds or demonstrate continued interest. This language is designed to override state and local laws that currently treat years of wallet inactivity as sufficient grounds for transferring ownership to another party. The provision defines a self-custodied digital asset as one where the owner maintains exclusive control of the private keys, operating without reliance on a custodian, exchange, or intermediary. This definition establishes the critical boundary upon which the rest of the provision depends.

The legislative scope has evolved significantly through recent Senate drafts. The May 8 and May 20 Senate drafts protected only the ability to hold a self-hosted wallet, focusing on the act of custody itself.

However, the July 22 version expands the scope beyond mere custody, extending into property law to address whether a person retains ownership of the coins inside that wallet after years of silence.

This shift indicates a broader intent to protect the asset title, not just the storage method, against state-level erosion of rights.

State unclaimed-property rules continue to govern custodial holdings, as the draft expressly preserves them for this category. Recent state amendments already treat exchanges, custodians, and hosted-wallet providers as a distinct category for assets that could belong to missing owners. In the exchange case, the custodian controls the keys, so state dormancy, reporting, and delivery rules for that custodian keep applying the way they always have. This distinction ensures that federal preemption targets only non-custodial arrangements, leaving the traditional regulatory framework for centralized entities intact.

The legal theory behind the lawsuit relies heavily on Section 257, which lets title vest in the finder under specific conditions. This includes property under $10 once a year of failed efforts to find the owner has gone by. The theory leans hard on the wallets' silence, citing years of coins sitting untouched with no owner surfacing to contest the claim. Section 20216 targets that mechanism directly, aiming to prevent a claimant from pointing to years of inactivity or a lack of communication as the basis for taking title under state abandoned-property law. Per Woofun AI, this specific targeting of "pure dormancy" and "silence" represents the central friction point between federal intent and state enforcement capabilities.

Noah Doe's plaintiffs also cite police reports, the OP_RETURN notices, and their attempts to contact possible owners as part of their case. That evidence goes beyond pure dormancy, and it could let them argue their claim rests on more than silence alone even if CLARITY becomes law. The provision closes the legal opening their case is testing without settling the lawsuit itself, since a court still has to weigh whether that additional evidence moves the analysis. The existence of these supplementary documents creates a complex evidentiary landscape that federal preemption may not fully resolve.

In the bull case, Section 20216 survives Senate negotiation with its preemption language intact, and courts read the phrase "solely due to inactivity" narrowly enough to give self-custody real protection. This outcome would effectively nullify claims based purely on dormancy. In the bear case, Senate negotiators strip or soften Section 20216 before a final vote, and whatever language survives leaves room for courts to weigh inactivity alongside other factors when deciding a claim. State-law experiments around dormant wallets stay possible, and a future claimant could still build a theory similar to Noah Doe's around long stretches of silence plus a notice campaign.

Self-custody keeps its protection as an activity; holding your own keys stays legal, and title during years of inactivity stays a live issue courts have to settle case by case. Section 20216 removes the single easiest argument a claimant could make against a silent Bitcoin address: the idea that years of nothing happening amounts to abandonment on its own. Whether that turns out to be enough depends on what survives Senate negotiation and what a judge eventually decides silence alone can prove.