SB 157

Abstract

This Act, the 2022 Amendments to the Uniform Commercial Code, was drafted by the Uniform Law Commission in partnership with the American Law Institute. The Uniform Law Commission "provides states with non-partisan, well-conceived and well-drafted legislation that brings clarity and stability to critical areas of state statutory law." The Uniform Commercial Code ("UCC") provides commercial law rules for broad categories of transactions: the sale or lease of goods, negotiable instruments, bank deposits and collections, funds transfers, letters of credit, documents of title, investment property, and secured transactions in personal property. Every state has adopted the UCC and, as a result, strong interstate markets have developed because the UCC provides the legal structure necessary to have confidence when transacting business with others. The UCC has been revised over time as the United States' economy shifted from a goods-based economy toward one based on services, software, and information-based transactions. The 2022 Amendments to the UCC ("2022 Amendments") are yet another revision to address the changing economy. Specifically, the 2022 Amendments do all of the following: (1) Provide updated rules for commercial transactions involving emerging technologies such as virtual currencies, non-fungible tokens (also known as NFTs), and distributed ledger technologies (also known as "blockchain"). (2) Create a new Article 12 addressing new types of property, or digital assets, defined as "controllable electronic records" ("CERs"). Examples of CERs include virtual currencies, non-fungible tokens, and electronic promises to pay. (3) Provide new default rules to govern transactions involving these emerging technologies and clarify the UCC’s applicability to mixed transactions involving both goods and services. (4) Update the UCC to recognize that parties often do not use paper documents and, therefore, the UCC applies equally to electronic transactions. (5) Make additional revisions to the UCC unrelated to technological developments but necessary to provide needed clarification of the UCC. (6) Create a new Article A to provide transition rules designed to protect the expectations of parties to pre-effective-date transactions. For example, a secured lender who has a priority security interest in collateral under the current law will retain its priority through a transition period, giving parties to preexisting transactions plenty of time to revise their agreements to comply with this Act. This Act amends the UCC and, as such, deals only with consensual commercial transactions. It does not regulate the use of these emerging technologies, including CERs, address taxation of CERs, alter the law governing money transmitters, or revise anti-money laundering laws. As of the introduction of this Act, the 2022 Amendments have been introduced in 21 states and the District of Columbia and enacted in 5 states (Indiana, North Dakota, Colorado, New Mexico, and Washington).