Proposed 2022 Amendments to the Uniform Commercial Code Addressing Digital Assets

Amendments to the Uniform Commercial Code cover a limited set of transactions largely involving emerging technologies such as virtual currencies, distributed ledger technologies, and artificial intelligence. The amendments would span most of the articles of the Uniform Commercial Code and add a new article addressing so-called digital assets. This presentation will concentrate on the changes addressing digital assets and the anticipated sponsoring organization approval and enactment process.

Takeaways From This Session:

• Digital asset technology is evolving rapidly and outstripping current commercial law rules. While there are several legislative proposals for regulation at the federal level, commercial law has largely been the domain of state law. There is tremendous pressure in the marketplace for state legislation to address the commercial law rules for virtual currency, nonfungible tokens (NFTs), electronic payment rights (beyond electronic chattel paper and electronic documents of title), proposed digital US dollars, and other digital assets.
• There are a number of challenges facing the American Law Institute (ALI)/ Uniform Law Commission Committee (ULC) amendment proposal project, including selling a uniform state enactment, the need for a uniform choice-of-law rule for cross-border transactions, and market pressures and timing.
• Some individual states, including Arkansas, Indiana, Nebraska, Texas, and Wyoming have adopted legislation proposed by the ALI/ULC. Other states with current UCC will apply their own choice-of-law rules, which likely will not point to these states. These and other state proposals may be “place savers” until the uniform amendments are promulgated. The uniform amendments will solve, among other things, choice-of-law issues within enacting UCC jurisdictions.
• Noteworthy, upcoming amendment approval dates:
  • ALI is scheduled for May 18, 2022
  • ULC “second reading approval” is scheduled for July 2022
  • If passed, a number of introductions and enactments can be anticipated as early as 2023