Digital Assets Now a General Intangible under Wyoming’s UCC
Wyoming is the first and only state to enact blockchain-enabling laws. It is also the first state to clarify the treatment of digital assets (bitcoin) under the Uniform Commercial Code. The virtual currency is considered a general intangible and the new law authorizes the granting of a security interest.
“AN ACT relating to property; classifying digital assets within existing laws; specifying that digital assets are property within the Uniform Commercial Code; authorizing security interests in digital assets; establishing an opt-in framework for banks to provide custodial services for digital asset property as custodians; specifying standards and procedures for custodial services under this act; clarifying the jurisdiction of Wyoming courts relating to digital assets; authorizing a supervision fee; making an appropriation; authorizing positions; specifying applicability; authorizing the promulgation of rules; and providing for an effective date.” – Text from the Sixty-Fifth Legislature of the State of Wyoming, 2019 General Session
Uniform Law Commission & American Law Institute Have Created a Committee
Although Wyoming is the first state to enact this legislation, other states are in the process of reviewing and drafting legislation of their own. However, the Uniform Law Commission (ULC) recommends states hold off on changes for the time being.
According to The Uniform Commercial Code and Digital Assets: Legislative Initiatives by Edwin Smith, the ULC and the American Law Institute have created a study committee to “…examine whether any amendments to the Uniform Commercial Code (the “UCC”), enacted in all states and the District of Columbia, are needed to accommodate emerging technological developments including digital assets.”
To maintain the “uniform” aspect of the Uniform Commercial Code, some critical issues need to be addressed. In his article, Smith identifies 3 keys: choice of law, substantive law, and ease of understanding and accessibility.
We’ve previously discussed the importance of governing law within your security agreements, right? Well, that is in line with issue 1: choice of law. Because digital assets don’t have a physical jurisdiction (unless the cloud is a jurisdiction?) who (where?) will determine jurisdiction?
“Addressing the commercial law rules for digital assets requires the formulation of uniform choice of law rules among all states. Otherwise, results among the states may differ depending on the state in which a dispute arises. Differing results leads to forum shopping and general commercial uncertainty, creating greater risks among transacting parties, discouraging some transactions, and in any event increasing transaction costs.”
Also, is it better to create new legislation or improve existing legislation? This falls under number 2 on his list: substantive law. The legislation should reduce confusion, not create confusion.
“Providing new legislation where existing law is already adequate may lead to confusion and uncertainty. Improving existing law will require a deliberative process that integrates the new legal rules into the system without disrupting the rules that have worked well for decades.”
Which goes hand in hand with ease of understanding and accessibility.
“Digital asset legislation that has the effect of modifying the rules of the UCC as, for example, by providing new rules for perfection or priority of security interests in digital assets, will be more difficult for practitioners to find and consider if the new rules are not integrated into the UCC itself.”
Stay Tuned! You may also find a Statement from the Uniform Law Commission, shared via ULC’s Twitter account, to be of interest.