On January 7th, I attended a meeting of the Emerging Technologies and Payment Systems Subcommittee under the Uniform Law Commission. I’m providing insight on the events of that call. Additionally, I’ve attached the pdf with the Topics of Discussion below.
On multiple occasions during the 1 hour call the UCC was referred to as, “ancient and archaic”. Currently, we live in a world where our financial systems have changed significantly since ACH was introduced in the 70’s. A significant overhaul of the UCC is needed to reflect current commercial transaction practices.
Most of the meetings discussion focused on the UCC’s Article 4. Article 4 covers things like written versus digital records and security procedures for transfers by banks. Conforming Entities, like Banks and Credit Unions, are held to the UCC’s standards but, nonconforming entities, like Paypal or Venmo, who transfer fiat and act as custodians are not. I wonder why that is?
The UCC is archaic!
Cryptocurrencies, like bitcoin, are not money under Article 1 of the UCC. This fact creates a secondary gap in the Uniform Commercial Code. If bitcoin is not money, then cryptocurrency exchanges, who transfer cryptocurrencies on behalf of their customers, aren’t transferring money.
The above thinking conflicts with the FATF ruling from 2019. The ruling describes how crypto exchanges are expected to properly report crypto to crypto transactions valued over $1000. The FATF is concerned about risk mitigation, Anti-Money Laundering(AML) and Counter Terrorism Financing. They are concerned with the US Dollar equivalent of the asset and not the asset being transferred.
As of yet, no meeting has been scheduled. When it is, an updated document will be distributed. The next meeting currently has no specific date or time agreed upon.
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