¶ 601
Overview
Scope of the chapter. This chapter examines Article 12 of the Uniform Commercial Code, which governs controllable electronic records, and the amendments to Articles 1, 8 and 9 that accompany it. The American Law Institute and the Uniform Law Commission approved these provisions in 2022 as part of a package known as the Uniform Commercial Code Amendments (2022). Article 12 supplies, for the first time in the Code, a set of rules for the transfer of intangible electronic records that exist only as entries in a system and are transferred by changes to that system. Bitcoin, ether, most stablecoins and most non-fungible tokens fall within it. The chapter explains what a controllable electronic record is, what "control" means, what rights a purchaser acquires, when a qualifying purchaser takes free of competing property claims, how controllable accounts and controllable payment intangibles work, which law governs, the operation of the transition rules, and the enactment of the article across the states.
The two functions of Article 12. Article 12 performs two functions. The first is to give digital assets a place in the commercial code. Before 2022, a token recorded on a public ledger was, for Code purposes, a general intangible: personal property with no special transfer rules, perfected only by filing, and subject to every prior property claim. Article 12 creates a defined category of property and attaches transfer rules to it. The second function is to confer a limited form of negotiability. A purchaser that obtains control for value, in good faith and without notice of a property claim takes free of that claim. Negotiability is the attribute that allowed money, negotiable instruments and certificated securities to circulate in commerce without each transferee investigating the chain of title. Article 12 extends a version of that attribute to records that exist only in electronic form.
What Article 12 does not do. Article 12 is narrow by design. It does not decide whether a token is a security, a commodity or money for regulatory purposes. It does not create the rights that a token represents or decide what those rights are. Section 12-104(c) provides that, except as provided in that section, "law other than this article determines whether a person acquires a right in a controllable electronic record and the right the person acquires." Article 12 also yields to Article 9 in a conflict (§ 12-103(a)) and to consumer-protection law (§ 12-103(b)). Most of the property-law questions considered in ch. 3 therefore remain questions of general state law even in a state that has enacted Article 12. See infra ¶ 640.
Sources. The text of Article 12 is quoted in this chapter from the Delaware enactment, 6 Del. C. §§ 12-101 to 12-107, added by 84 Del. Laws c. 174 § 90, which follows the official text without material variation. Section numbers are given in the uniform numbering (§ 12-105) and apply to every enacting state, subject to the state's own codification; Oregon, for example, codifies Article 12 at ORS 80.1010 to 80.1070, and Ohio at Ohio Rev. Code ch. 1314. Article 9 and Article 1 provisions are likewise quoted from the Delaware text. The Official Comments to the 2022 amendments explain the drafters' intent on many points. This chapter states the rules from the statutory text and identifies the points on which courts have yet to rule.
Relation to other chapters. Chapter 2 describes the technology of keys, wallets and shared control on which the concept of control depends; Example 2-5 applies § 12-105(c)(2)(B) to a two-of-two arrangement between a lender and its borrower. See supra ¶ 250. Chapter 3 examines the characterization of digital assets as property under general state law, and ch. 5 treats conflict of laws, including the governing-law rule of § 12-107, at greater length than ¶ 660 below. Chapter 7 examines security interests in controllable electronic records: attachment, perfection by filing and by control, priority and enforcement. This chapter states the Article 9 rules only so far as needed to explain Article 12 and leaves their application to ch. 7. Chapter 8 examines tokenized securities and the relation between Article 8 and Article 12.
Organization. ¶ 610 explains the problem the 2022 amendments addressed and the drafting project. ¶ 620 examines the definition of a controllable electronic record and its exclusions. ¶ 630 examines control under § 12-105. ¶ 640 examines the rights of purchasers and the take-free rule of § 12-104. ¶ 650 examines controllable accounts, controllable payment intangibles and the discharge rules of § 12-106. ¶ 660 examines governing law. ¶ 670 examines the conforming amendments to the definition of money, the new category of electronic money, and the relation to Articles 8 and 9. ¶ 680 examines the transition rules, the state of enactment and the regimes that remain outside Article 12, including Wyoming's. ¶ 690 applies the rules to exchange accounts, non-fungible tokens and stablecoins, and closes with a checklist.