At its annual meeting in July, the ULC approved a final draft of the joint ULC-ALI Emerging Technologies Committee’s (ETC) amendments to the UCC, which includes a completely new Article 12 that is devoted to defining various digital asset classes and setting ground rules for crypto-backed secured financings. New Article 12 will dovetail with a series of amendments to existing Article 9 (secured transactions) and Article 3 (negotiable instruments).
The ETC was formed in 2019 to address a growing list of legal questions stemming from the unique and intangible features of cryptocurrencies, NFTs, and other emerging digital assets, including, significantly, how security interests in digital assets can be perfected.
The new Article 12 deals with transfers of interests in a forward-looking, catch-all class of digital assets branded “controllable electronic records” (CERs), a term that was intentionally crafted to go beyond current distributed ledger and blockchain concepts in order to capture future, yet-to-be-invented intangible digital assets. Under new 12-102(a), a CER is nebulously defined as “a record stored in an electronic medium” but specifically excludes, among other things, “electronic money,” electronic records of promissory note debt (“controllable payment intangibles”), and electronic records of accounts receivable (“controllable accounts”). But per the ETC’s guidance, CERs include NFTs because NFTs do not specifically fall into any of these excluded categories of digital assets.
The proposed amendments to Article 9 are largely focused on clarifying…
