The Uniform Commercial Code ('UCC') is a law that has been drafted and updated by the Uniform Law Commission, and has been enacted in all 50 states of the United States. UCC Article 9 governs secured loans that are collateralized by digital assets and other personal property that are directly owned by the debtor. UCC Article 8 governs the system of holding investment securities through intermediaries.
Under UCC Article 9, cryptocurrency is a type of personal property that, while not specifically defined in the UCC, is categorized as a "general intangible.” This is because a “general intangible” is defined as "any personal property, including things in action, other than accounts, chattel paper, commercial tort claims, deposit accounts, documents, goods, instruments, investment property, letter-of-credit rights, letters of credit, money, and oil, gas, or other minerals before extraction. The term includes payment intangibles and software.” UCC § 9-102(a)(42).
A security interest in a “general intangible” is perfected by filing a UCC-1 financing statement in the jurisdiction where the debtor is located. See UCC § 9-310(a). Consequently, a creditor that is making a loan that is secured by cryptocurrency (such as bitcoin) can preserve and perfect its security interest in the collateral by both (i) transferring the cryptocurrency from the debtor’s wallet to a wallet controlled by either the creditor or an escrow agent and (ii) filing a UCC-1 financing statement in the jurisdiction where the debtor is located. The financing statement will need to include the name of the debtor, the name of the secured party, and a description of the collateral.
On February 26, 2019, Wyoming became the first state to update its UCC with respect to the specific treatment of a security interest in various types of digital assets. The new law, which will be effective on July 1, 2019, defines three types of digital assets: (i) a "digital consumer asset," which is specifically classified under the Wyoming UCC as a general intangible, (ii) a "digital security," which is specifically classified under the Wyoming UCC as a security and investment property, and (iii) "virtual currency," which is specifically classified under the Wyoming UCC as money. See Wyo. Stat. Ann. § 34-29-102. In addition, the new Wyoming law (i) specifies a method of perfection of security interest in a digital asset based upon control and (ii) provides that a transferee of a digital asset takes the asset free of any security interest two years after the transferee takes the asset for value and does not have actual notice of any adverse claim. See Wyo. Stat. Ann. § 34-29-103.
Previously, on October 02, 2018, the Uniform Law Commission had approved a more narrow proposal to amend Article 8 of the UCC, solely with respect to virtual currency that is held by a "securities intermediary." A "securities intermediary" is a "(i) clearing corporation; or (ii) a person, including a bank, broker that in the ordinary course of its business maintains securities accounts for others and is acting in that capacity." See UCC § 8-102(a)(14). The status of adoption of the Uniform Law Commission's proposed legislation in state legislatures is set forth on this website.
Set forth below are copies of the correspondence between the Uniform Law Commission and the Wyoming Legislature concerning the Wyoming UCC legislation.
|Date||Wyoming UCC Revision Correspondence|
|01/29/2019||Letter from Uniform Law Commission to Wyoming Legislature.|
|02/06/2019||Letter from Uniform Law Commission to Wyoming Legislature.|
|02/27/2019||Letter from Wyoming Legislature to Uniform Law Commission.|
|02/28/2019||Letter from Uniform Law Commission to Wyoming Legislature.|
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