Week of December 15-21st, 2019
As the end of the year winds down, so does crypto legislation work. The week before Christmas I attended a ULC(Uniform Law Commission) subcommittee meeting to discuss the Uniform Commercial Code (UCC) as it relates to cryptocurrency and blockchain technology. I also helped facilitate a phone meeting between Caitlin Long, Chris Land, General Counsel, Wyoming Division of Banking. and the Chair of the California Lawyer’s Association’s, Business Law, Commercial Transaction standing committee, Walter Oetzell.
The first was a ULC subcommittee group for “Other Digital Assets”. The purpose of this subcommittee is to determine, “…whether revisions to the UCC or other private law harmonization may be necessary…[when] consider[ing] transactions and relationships governed by the current UCC as…might be applied, modified, or adapted for digital assets.” There is another subcommittee responsible for virtual currencies.
The Co-Chairs of the Subcommittee are Charles Mooney and Carla Reyes. I have heard Carla speak on several occasions and felt pleased to know she was helping lead this group. Also on the call was Drew Hinke, General Counsel at Athena Bitcoin and Adjunct Associate Professor at NYU School of Law.
The call was scheduled for 3 hours. It was fairly brief ending less than 1 hour after starting.
Topics covered were:
- Definitions of “Digital Assets” and “Virtual Currency”
- Contractual, liability, and proprietary aspects of transfers (sales) of digital assets Consider analogous rules relating to goods (Article 2), instruments (Article 3), letters of credit (Article 5), investment property (Article 8), and intangibles (Article 9, in particular Part 4)
- Custody/Intermediation -Holding of digital assets
- suitability (adaptability) of Article 8 indirect holding regime;
- need for new, sui generis rules for custody of digital assets;
- relationship/relevance of regulatory (e.g., licensing, supervision, operational standards) framework for digital asset custodians to/for private-law rules
- Security interests in digital assets (not addressed in topic 2): creation, perfection, priority
- perfection methods: Filing, control;
- how to define control;
- superpriority for control
While discussing custody issues, I made sure people understood some of the simple mechanics that exist. For example, how multisignature capabilities can play into the idea of perfected assets or priority rules for bankruptcy. I sometimes forget not everyone understands all of the possibilities these technologies are capable of.
Additionally, I reminded the group that User-directed custodial transactions are “push” transactions, similar to processing a bank wire. Also, Digital Asset Custodians can provide similar functionality to current financial systems by allowing for “pull” transactions, like ACH. User-controlled assets do not allow for this behavior to occur, because the User would need to relinquish his private keys in order to accomplish a “pull” transaction. The rights of the individual should be protected in either case.
By the time we got to the last topic, the group decided they had touched on all the points needed and adjourned the meeting.
California Commercial Transactions
The purpose of the phone call was to allow the regime responsible for interpreting the Uniform Commercial Code in California and the parties involved in Wyoming’s crypto friendly legislation to converse.
I was actually in the car on my way to LA and was trying to listen the best I could. The conversation lasted about 45 minutes and was mostly them discussing the UCC and Wyoming’s approach. Walter was looking for clarity on how to handle Article 9 since perfecting digital assets is something new.
Caitlin and Chris both provided wonderful examples and spoke with such passion. A lot of Wyoming’s approach hinges on it’s classification of cryptocurrency by providing direct property rights to owners and treating it as money for commercial law application. The UCC doesn’t allow for perfecting, or taking a securitized interest in, money. Only physical items can be perfected.
Will this be changing in the future? Who knows, but I have another call with all of them next month in late January. I’ll keep you posted.
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