New York Enacts 2022 UCC Amendments Creating New Regime for Digital Assets Under State Law

New York has now joined with 32 other states and the District of Columbia in enacting the 2022 amendments to the Uniform Commercial Code (UCC) promulgated by the American Law Institute and the Uniform Law Commission. The amendments become effective in New York on June 3, 2026.

Key among the 2022 amendments are those dealing with a certain category of digital assets referred to as “controllable electronic records” (CERs). Examples of CERs are cryptocurrencies, non-fungible tokens, and electronic promissory notes. The amendments provide rules for determining what rights a transferee of a CER obtains and for the perfection and priority of a security interest in CERs, including those evidencing certain payment rights. The amendments do not address the regulation of a CER, whether as a security or a commodity, the taxation of CERs, or money transmitter or anti-money laundering rules. These matters are left to law outside of the UCC.

FUTURE-FOCUSED APPROACH TO TOKENIZATION AND DIGITAL ASSETS

While the amendments will facilitate transactions using distributed ledger technology, the amendments are technologically neutral (i.e., they are not wedded to any particular technology). They are drafted to accommodate not only technologies known today but also technologies of the future. However, looking forward from today, the amendments are helpful in providing a foundation for parties trying to structure the tokenization of securities and other real-world assets.

ADDITIONAL CHANGES TO THE UCC

The amendments also make an array of other sundry changes to the UCC. They modify certain provisions of the UCC dealing with (1) writings to permit electronic transactions, (2) chattel paper and documents of title to accommodate distributed ledger technology, (3) negotiable instruments to address risks in connection with the remote deposit of checks, (4) funds transfers to address security procedures, and (5) disclaimers of warranty claims on the sale or lease of goods to address whether the disclaimer is “conspicuous” so as to be binding on the buyer or lessee.

Furthermore, the amendments provide clarification on the extent to which the UCC provisions on the sale or lease of goods apply to a “hybrid” transaction consisting of the sale or lease of goods and provision of services or other property as a single transaction.

APPLICABILITY AND EFFECTIVE DATES

The amendments contain transition provisions. These include provisions designed to protect the expectations of parties to transactions occurring before the effective date of the amendments and to provide sufficient time for parties to plan transactions occurring after the effective date of the amendments.

ADDITIONAL INFORMATION

A useful summary of the 2022 amendments may be found on the Uniform Law Commission’s website.

The amendments reflect the efforts of the sponsoring organizations and numerous advisors and observers over a period of three years to provide needed updates to the UCC to address technological developments. The enactment of the amendments in New York is a big step forward towards all states enacting the amendments.

HOW WE CAN HELP

Our team participated in the drafting of the 2022 amendments and stands ready to assist parties in structuring transactions and amending documentation to pursue opportunities created by the amendments.