A businesswoman sitting at her desk reviewing the UCC amendments
ComplianceLegalSeptember 09, 2022

UCC adds Article 12 and other amendments to address emerging technologies

The Uniform Commercial Code (UCC) is a set of rules that governs commercial transactions involving personal property. The UCC has been adopted by all 50 states and the District of Columbia and serves as the basis for each of those jurisdictions’ commercial law.

The UCC’s sponsoring organizations — the American Law Institute (ALI) and Uniform Law Commission (ULC) — monitor developments in commercial law and update the UCC when necessary to keep up with these developments. And for the last three years, a committee formed by the ALI and ULC has been working on amendments to the UCC to cover transactions involving emerging digital technologies.

The amendments were adopted by the ALI and ULC in May 2022 and July 2022 respectively, and the states can now enact the amendments in their entirety or with non-uniform state-specific variations.

An overview of the 2022 amendments

The 2022 amendments deal with the rights of private parties in consensual transactions involving digital assets. They do not address issues not involving commercial law, such as whether digital assets are securities or commodities, the taxation of digital assets, or the application of money-transmitting laws or anti-money laundering laws to digital assets.

Almost every article of the UCC was revised in some way. However, the key to the 2022 amendments is the addition of a new Article 12, which governs transactions in a subset of digital assets called “controllable electronic records” or CERs. Article 12 clarifies a number of important issues — including to what extent the buyer of a digital asset takes the asset free of third-party property claims and what it means to “control” a digital asset.

Also, Article 12, along with the amendments to Article 9, clarify another important issue — how does a secured party perfect a security interest in digital assets and ensure that its interest has priority.

What is a controllable electronic record?

Article 12 introduces the concept of the controllable electronic records (CER). A CER is defined as a record of information in electronic form that is susceptible to control. Examples include virtual currency, non-fungible tokens, and digital assets with embedded payment rights.

Control of a CER is basically analogous to possession of a non-digital asset. For a person to have control of a CER the person must have:

  1. the power to enjoy substantially all the benefits of the CER (which does not have to be exclusive),
  2. the exclusive power to prevent others from enjoying substantially all the benefits of the CER, and
  3. the exclusive power to transfer control or to cause another person to obtain control of the CER

In addition, the person must be able to identify themselves to a third party as the person in control.

There is a rebuttable presumption that the exclusivity requirement has been met.

If an electronic record is not susceptible to control, it is not a CER. The definition of CER also excludes certain digital assets in which there are already adequate commercial laws governing the assets, including:

  • Electronic chattel paper
  • Electronic documents
  • Investment property
  • Transferable records under the federal E-Sign Law or the Uniform Electronic Transactions Act
  • Deposit accounts
  • Electronic money

What rights do the purchasers of a CER get?

Article 12 provides that if a CER is purchased, the purchaser acquires an interest in all the rights in the CER the transferor had, or had the power to transfer.

If the purchaser is a qualifying purchaser, the purchaser takes free of any property claim to the CER. A qualifying purchaser is a purchaser that obtains control a CER for value, in good faith, and without notice of a property claim to the CER.

Electronic payment rights: Controllable accounts and controllable payment intangibles

If an account or payment intangible is evidenced by a CER, and the person obligated on the account or payment intangible has agreed to pay the person in control of the CER, then you have a controllable account or a controllable payment intangible.

If control of that CER is transferred, the controllable account or controllable payment intangible travels with the CER, and the transferee benefits from the take-free rule that applies to the CER if the transferee is a qualifying purchaser. The effect is to create a promissory note in electronic form.

If the account debtor agrees not to assert claims or defenses against the transferee of the CER, the effect is to create an electronic negotiable instrument.

Article 12’s governing of the payment rights embedded in controllable accounts and controllable payment intangibles is an exception to the rule that law other than Article 12 determines what rights are embodied in the CER and whether the take-free rule applies to those rights upon a transfer of the CER.

Secured transactions under amended Article 9

Amended Article 9 clarifies the perfection and priority of security interests in CERs, controllable accounts, and controllable payment intangibles.

For the purposes of Article 9, a CER is a “general intangible”, a controllable account is an “account”, and a controllable payment intangible is a “payment intangible.” Because these assets are included in pre-existing categories of collateral there is no need to change existing collateral descriptions in security agreements and financing statements.

The normal rule of attachment applies to CERs (e.g., that value is given for the security interest, the debtor has rights in the collateral or the power to transfer the collateral to the secured party, and the debtor authenticates a security agreement).

A security interest in a CER, controllable account or controllable payment intangible can be perfected by filing a financing statement or by control (as defined in Article 12). A security interest in a CER, controllable account, or controllable payment intangible perfected by control has priority over a security interest perfected only by the filing a financing statement — even if control is obtained after the filing of the financing statement.

The amendments to Article 9 also create the concept of “electronic money” (which excludes money not subject to control and would include, for example, virtual currency created by a government’s central bank). A security interest in electronic money can only be perfected by control. (However, if the electronic money is credited to a deposit account, the normal deposit account rules apply.)

Choice of law

The amendments contain a choice of law provisions for the take-free rules for purchasers of CERs and for the perfection, control, and priority of security interests in CERs, controllable accounts, and controllable payment intangibles.

The general rule is that you look to the law where the CER is located. A CER is located in the jurisdiction where the CER expressly states it is located. If the CER does not so state, it is located in the jurisdiction which is stated to govern the system in which the CER is recorded. If that law is not expressly stated then the law of Washington D.C. applies (assuming D.C. enacts the amendments). However, in the case of the perfection of a security interest by the filing of a financing statement, the normal debtor location rule applies to the perfection (but not the priority).

Transition provisions

The amendments contain transition provisions designed to protect the expectations of parties to transactions occurring before a state enacts the amendments. There is an “adjustment date” of at least one year from the date the amendments go into effect in the relevant state. Thus, for example, a secured lender who has a priority security interest in collateral under pre-amendment rules will retain its priority through the transition period, giving the parties to the loan agreement time to revise the agreement and comply with the updated rules.


The amendments use technologically neutral terms rather than terms such as “blockchain”, “distributed ledger”, or “public and private keys”. This is intentional so that the amendments will not only apply to known technologies but to future technologies as well.

The definitions of various terms are revised to reflect the digital economy. For example, “sign” is amended to include electronic signatures, “writing” is replaced by “record” in many places, and “conspicuous” is revised to apply to electronic agreements.

The definition of “money” is amended to clarify that governmentally created forms of money may be electronic as well as tangible. The definition also excludes a virtual currency that existed and operated as a medium of exchange before it was authorized or adopted as a medium of exchange by a government. (Bitcoin is an example of such a currency as it existed before being adopted as a medium of exchange by two foreign governments.) However, such virtual currencies, even if not “money”, may still qualify as a CER.


As noted, the 2022 amendments revise almost every Article of the UCC and go well beyond the changes noted in this article, which concentrates on new Article 12 and the amendments to Article 9. Anyone with an interest in digital assets should become familiar with all the amendments and also keep track of which states enact these amendments and when the amendments will go into effect.

More information is also available from the ULC’s website.

CT Corporation offers streamlined UCC solutions to meet even the toughest of deadlines. Contact us today to learn more. 

Sandra Feldman
Publications Attorney
Sandra (Sandy) Feldman has been with CT Corporation since 1985 and has been the Publications Attorney since 1988. Sandy stays on top of the most pressing and pertinent business entity law issues that impact CT customers of all sizes and segments.
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