The introduction of UCC Article 12 is redefining cryptocurrency use as collateral across the United States, with legal bodies like the American Law Institute guiding the transition.
This shift is critical for enhancing digital asset markets, potentially increasing institutional participation and liquidity while providing clarity in secured lending practices.
UCC Article 12 alters digital asset collateral regulations, impacting secured lending in crypto markets.
The transition to UCC Article 12 is fundamentally altering the use of digital assets as collateral, affecting cryptocurrencies and NFTs in secured lending across the U.S. Significant changes to legal frameworks improve the use of digital assets.
UCC Article 12 Transforms Digital Asset Collateral Use
The American Law Institute and Uniform Law Commission are responsible for the amendments, with state legislatures and commercial law practitioners driving adoption. No major crypto CEOs have commented, leaving the spotlight to legal experts.
BlackRock Eyes Crypto Derivatives Amid Legal Clarity
Large institutions like BlackRock anticipate using crypto in derivatives trades, encouraged by legal clarity. Digital assets qualifying as Controllable Electronic Records may see improved pricing and liquidity in secured lending.
Expert analysis highlights financial benefits, anticipating increased DeFi lending activity and reduced credit costs. The demand for legal certainty is expected to amplify as Ethereum, Bitcoin, and NFTs integrate into secured lending practices.
UCC Article 12 Provides Perfection by Control Mechanism
Previously, digital assets were categorized under Article 9’s general intangibles, but now Article 12 allows “perfection by control”, enhancing collateral priority. This mirrors the securities market’s expansion when integrated under UCC frameworks.
Legal experts foresee a notable shift in lending models based on this legislative change. The consensus suggests that enhanced legal certainty will solidify digital assets’ position in lending, prompting broader economic implications. As noted by Willkie Farr & Gallagher LLP, Legal Analysis:
UCC Section 12-107(a) sets forth the basic rule that the local law of the CER’s jurisdiction governs matters covered by UCC Article 12, … uniformity is required to reduce transaction costs (including the cost of credit) and protect interstate electronic commerce.
| Disclaimer: This website provides information only and is not financial advice. Cryptocurrency investments are risky. We do not guarantee accuracy and are not liable for losses. Conduct your own research before investing. |
