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"The Uniform Commercial Code (UCC) sponsoring organizations have proposed a new Article 12 to the UCC, which is intended to keep pace with these and other emerging types of collateral. If adopted, the new Article 12 will create an asset classification called "controllable electronic records" (CERs). To ensure the UCC remains relevant, CERs are defined to include not only assets created using extant distributed ledger or "blockchain" technology (such as cryptocurrency and NFTs), but also any assets that may function similarly using future technologies."

"To keep pace with the legal and technological developments associated with digital assets, in 2022 the sponsoring organizations for the Uniform Commercial Code (UCC) - the American Law Institute and the Uniform Law Commission - approved amendments to the UCC addressing transactions involving these emerging digital technologies (collectively, the Uniform Amendments). The Uniform Amendments impact a majority of the articles of the UCC. Most notably with respect to digital assets, the Uniform Amendments include the creation of a new Article 12 and revisions to Article 9 regarding the perfection of a security interest in such assets. "

"Changes to the Uniform Commercial Code (UCC) are not usually headline news, but recent changes around the UCC's definition of money have been catching attention across the country. Concerns have erupted around the idea that states are quietly banning Bitcoin and paving the way for central bank digital currencies (CBDCs)."

The North Carolina (NC) House of Representatives and the Florida House of Representatives and Senate approved anti-central bank digital currency (CBDC) legislation.  The NC legislation prohibits individuals from using CBDCs for any payments to the state, and bars the Federal Reserve from using NC as a potential CBDC pilot testing ground. The Florida legislation excludes CBDC from the definition of "money" for purposes of the Uniform Commercial Code (UCC). The Cato Institute's Nicholas Anthony has written a nice explainer on the impact of the UCC on digital currency in general, and the Uniform Law Commission has published a paper that covers the CBDC impact specifically.

This article spells out how to build a USD stablecoin legal basis by leveraging the core commercial law principles of (i) focusing on the principles of settlement finality, (ii) rules for adverse claims, (iii) discharge of the underlying obligation, and (iv) the concept of a security entitlement. It maps out how these principles are embodied under the U.S. commercial laws of investment securities (UCC Article 8) and of payments (UCC Articles 3, 4, and 4A). The goal in doing so is to show how innovators can incorporate novel, technology-driven market practices and business models into the existing financial law framework in a proven and effective way - how to leverage what is working today and does not need to be invented again. Awareness of the availability of these commercial law tools, and their limitations, can provide important help to stablecoin developers and market participants in managing their exposure, designing efficient financial innovations, and controlling the risk to the broader financial market.

A joint committee of the U.S. Uniform Law Commission (ULC) and the American Law Institute (ALI) finalized a significant and wide-ranging amendment to the Uniform Commercial Code (UCC) that addresses the quirks and nuances of digital asset transactions and crypto-as-collateral secured financings. The amendments include 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).

In this Twitter thread, Adam Levitin discusses the impact on crypto-asset markets of the new (and pending) Article 12 (A12) of the U.S. Uniform Commercial Code (UCC). The UCC is state law, but it's developed by the American Law Institute (ALI) and the Uniform Law Commission (ULC), which has state government representatives. A12 has been approved by the ALI and is pending ULC approval. Once that happens, it will be up to state legislatures to adopt it, which may take a year or two. A12 will enable perfection of security interests in digital assets, which is not possible in most states. That's a problem because if a debtor (e.g., a crypto-asset exchange) files for bankruptcy, any unperfected security interest (e.g., crypto-assets held in custody at the bankrupt exchange) can be avoided, meaning that the creditor (crypto-asset holder) becomes an unsecured creditor. For more detail see Adam's "Not Your Keys, Not Your Coins" paper.

Wyoming recently awarded its second special-purpose depository institution (SPDI) charter to Avanti Bank. One of the most notable products that Avanti intends to offer is the "Avit" stablecoin "disruptor." Avanti Bank's Avit will be a tokenized, programmable US dollar. Becasue Avit will be issued by, and be a direct obligation of, a bank, making it an electronic version of a traditional bank note. This means the Avit can be used in software applications like other stablecoins but may be considered more reliable than traditional stablecoins because users can trust that the deposits backing the Avit are held in the same state chartered financial institution that issued the instrument. Critically, if the Avit is a bank note it is also exempt from regulation as a security by the SEC. One legal wrinkle is that Article 3 of the Uniform Commercial Code (UCC), which governs bank notes, has never before been directly extended to electronic negotiable instruments such as digital bank notes. Nevertheless, there is an argument that Article 3 provides the necessary legal framework for banks to issue a variety of electronic negotiable instruments, including digital certificates of deposits. One could argue that a bank issuing a product with features similar to a stablecoin is really just a new form of a traditional bank activity.

"On Friday Florida's governor Ron DeSantis signed legislation that bans the use of a central bank digital currency (CBDC) in the state. Following the bill SB 7054 being signed into law, Florida's Uniform Commercial Code (UCC) now explicitly forbids the use of a federally adopted CBDC as money."

13 U.S. states have now passed, or may soon pass, anti-CBDC legislation. Some are aimed at preventing the state from accepting CBDC as payment, and many many additionally block participation in CBDC trials. Others are excluding CBDC from the definition of money in the Uniform Commercial Code (UCC) so businesses can't use CBDC to discharge liabilities.