Will I risk a lawsuit if I buy a token from a hacker?
How do I know if there is a lie or claim regarding my Bitcoin?
What are my rights if I borrow my airtime and the borrower does not repay the loan or file for bankruptcy protection?
These questions have fueled the cryptocurrency industry since its inception. While law and regulation have rapidly embraced digital assets, many private law questions remain unanswered. These include ownership of digital assets or the extent of legal rights acquired upon transfer of digital assets, the ability to satisfy security interests in digital assets, and the prioritization of security rights over digital assets. For most of these matters, US law refers to Section 9 of the Uniform Commercial Code (UCC).
Andrew Hinks is a Partner at K&L Gates, Chair of Digital Assets, Blockchain Technologies and Cryptocurrencies Practice, and Adjunct Professor of Law at New York University and NYU Stern School of Business. Hinks was a consultant to the Digital Assets Task Force that drafted Section 12 and its accompanying amendments.
The UCC simplifies the rules applicable to common business transactions, such as secured loans and certain transfers of property, by providing for damages and omissions, simplifying business law and encouraging parties to enter into agreements, and establishing binding rules. After three years of research, debate, and drafting, changes to the 2022 Uniform Commercial Code include new Article 12 of the Uniform Commercial Code, which aligns existing digital asset legislation. Why is this important for cryptocurrencies? Many concerns would be resolved if the 2022 UCC Amendments were adopted uniformly across all 50 states. For instance:
How does proposed UCC Article 12 apply to my digital assets?
Section 12 of the UCC created a new class of property called Electronic Controlled Record (CER) that builds on the existing provisions of the UCC and applies that law to those who control the CER, not the widow. owner. Security law is based on the concept of financial records or possession, which generally requires physical possession. (An absolute security interest is a secured right in property that another party cannot claim.)
Digital assets such as ether and intangible tokens (NFTs) are intangible and cannot be owned within the meaning of the law. Rather than relying on physical possession, the CER definition uses 'control'. Control is determined using a functional test that requires more than private key control and focuses on the right to use all other benefits of ownership and the ability to transfer ownership to third parties.
See also: Cryptography and "Horse Law"
Most cryptocurrencies, tokens, stable metals, and NFTs are likely CERs because one person can essentially use all of their benefits without interfering with someone else's enjoyment.
Are my parts "dirty"?
“Pure” or “virgin” coins not in circulation since the minting is more sought after than those in circulation; This is because pure currencies, by definition, are exempt from any regulatory or legal requirements that may apply when trading these assets. As litigation continues, parts held as collateral or transferred to a third party may result in a lawsuit against the current owner.
As the law currently stands, (a) any digital asset has a claim or (b) any claim applicable to the digital asset continues to apply to the asset after it is transferred. Another person, Section 12, will explain when the beneficiary receives property that was previously "subject to claims" and under what conditions the beneficiary can be "released" from the claim.
A person who receives property under credit, assigns value to it, and has no notice of opposition to the claim, receives the property without further claim. Thus, Article 12 makes CERs more negotiable by making them comparable to other negotiable instruments such as checks and promissory notes.
Do I have a security interest in a digital asset portfolio?
While many loans are intentionally unsecured, meaning the lender has no right of seizure in the event of default, in other cases the borrower can grant the lender a legally enforceable security interest in the digital assets. guaranteed. Prior to Article 12, it was difficult to improve the security interest in these digital assets and to enforce the security interest over competing interests.
See: Will international regulation hinder the crypto industry or encourage new users? | Suspension:
By incorporating CERs, the new rule makes it clear that perfection can be achieved either by filing (i.e. submitting a UCC-1 financial statement to the relevant state registrar) or by verifying and prioritizing existing CERs and completing the program. . Verify previously submitted financial statements. Until Section 12 of the Union Carbide Act is adopted by all states, we must deal with the confusing situation where different rules can be applied arbitrarily depending on circumstances such as the location of the debtor.
Although the UCC Amendments address the security of crypto-related transactions, the UCC does not address other substantive laws that may affect these assets. Look elsewhere for clarification on securities and commodities regulation, intellectual property, taxes, penalties, anti-money laundering, or customer rights in digital exchanges. Article 12 creates assumptions and fills gaps so that parties can transact under common rules without having to negotiate complex agreements in the course of their transactions.
It is time for the cryptocurrency industry to trust the legal meaning of credit and secure digital asset transactions. The crypto industry must support the passage of Section 12 of the UCC Act.