A proposed California bill targeting ultra-high-net-worth individuals is sending tremors through Silicon Valley and the global crypto industry, raising fears of a mass exodus of Web3 founders, venture capitalists, and blockchain startups.
Lawmakers are considering a sweeping tax on residents with net worth exceeding $50 million, including a controversial provision that would impose levies on unrealized capital gains. If enacted, the measure could fundamentally reshape how crypto entrepreneurs manage wealth—and where they choose to build their companies.
A Direct Threat to Digital Wealth
The legislation poses a unique challenge for blockchain founders whose fortunes are often tied up in illiquid tokens and long-term protocol holdings rather than cash.
Many Web3 entrepreneurs are “paper billionaires,” holding large token allocations that cannot easily be converted into fiat without disrupting markets. Being forced to pay taxes on unrealized gains could trigger large-scale cryptocurrencies sales, potentially destabilizing token prices and damaging entire ecosystems.
Industry experts warn that such a policy would turn treasury management into a logistical nightmare for California-based startups. More critically, it could sharply reduce the capacity of angel investors to fund emerging technologies, weakening one of Silicon Valley’s core innovation engines.
Once seen as the world’s most fertile ground for innovation, California now risks becoming a hostile environment for builders, as rising tax pressure threatens to outweigh the region’s traditional advantages of talent density and networking.
The architects of California’s “Billionaire Wealth Tax” ballot proposition quietly amended language in their proposal which, if successful, would permanently end the concept of founder-controlled startups in the state — a technology industry kill switch. https://t.co/mu7p0ShdCg
— Mike Solana (@micsolana) January 13, 2026
Crypto Leaders Look to Texas and Florida
Anticipating the potential fallout, many crypto billionaires are already eyeing relocation to states like Texas and Florida, both of which offer no state income tax and increasingly crypto-friendly regulatory climates.
The shift is no longer limited to individuals. Entire company headquarters are reportedly considering moves to cities such as Austin and Miami to preserve capital for product development and expansion.
Such a migration could significantly weaken San Francisco’s standing as a global DeFi hub. A sustained brain drain would also reduce California’s overall tax base, as highly skilled workers and top earners depart en masse.
Executives at crypto exchanges and venture capital firms are now prioritizing regulatory stability above all else. Ongoing political uncertainty is pushing decision-makers toward jurisdictions with more predictable fiscal frameworks.
Long-Term Risks for Tech Investment
If the bill becomes law, critics say it would send a powerful signal to global markets that California is increasingly hostile to financial success, potentially discouraging new founders from launching projects on the West Coast.
Venture capital, a critical driver of crypto innovation, could dry up as after-tax returns shrink. International investors may redirect capital toward emerging tech hubs in Europe or Asia instead.
To offset the loss of its largest taxpayers, California may ultimately be forced to rethink its economic model. Without course correction, Silicon Valley could gradually lose its status as the world’s dominant technology powerhouse to more competitive and welcoming cities elsewhere.
