Relating to the uniform commercial code by providing for controllable electronic records

BACKGROUND. This bill creates a new article within Code chapter 554, Iowa’s version of the uniform commercial code (UCC) covering commercial transactions involving personal property. New Article cited as “Uniform Commercial Code —— Controllable Electronic Records” was drafted by a committee appointed jointly by the uniform law commission and the American law institute.14101). New Article governs commercial transactions involving digital assets, including those involving virtual currencies, and the use of distributed ledger technology (DLT). 1201(2)(x)). By comparison, a virtual currency is only available as an electronic record and is decentralized. An electronic record is used to create or transfer rights to receive payment, to receive performance of services or delivery of goods, and to transfer an interest in property. It may also be used as a medium of exchange and assigned intrinsic value. CONTROLLABLE ELECTRONIC RECORDS. The bill applies to a form of digital assets used in electronic commerce and referred to as controllable electronic records.1201(2)(ae)).14105).14104). Specifically, control involves the power to (1) derive substantially all the benefit from the controllable electronic record, (2) prevent others from deriving substantially all the benefit from the controllable electronic record, and (3) transfer control of the controllable electronic record to another person or cause another person to obtain control of a controllable electronic record. QUALIFIED PURCHASERS. A purchaser who is transferred control of a controllable electronic record for value, in good faith, and without notice of any claim of a property interest in the controllable electronic record is referred to as a qualified purchaser who takes the controllable electronic record free of any claims against the property. Generally, law outside Article determines what rights a person must take in order to acquire an interest in a controllable electronic record which would include the creditor-debtor provisions in Article 9.9326A). SPECIAL TYPES OF PROPERTY. Special provisions apply to accounts and payment intangibles in the form of controllable electronic records.9102(2)).9203(10)).14104).9102(1)).9105A). BACKGROUND —— ARTICLES AND 9. Article includes general provisions, including definitions, that apply throughout the Code chapter.1201).9101). Article governs how a debtor provides the debtor’s property as collateral to secure financing provided by a creditor. The creditor obtains a lien in the collateral to secure the debt. Article provides for the rights and obligations of the debtor and creditor as well as other persons, including other creditors, engaged in commercial transactions which involve that debtor’s collateral. Generally, the creditor becomes a secured party able to enforce rights against the debtor when a security interest attaches to the debtor’s collateral. The secured party is able to enforce creditor rights against other persons when the creditor’s security agreement is perfected. Article provides different procedures to attach a security interest to collateral, and to perfect that security interest, depending upon how Article classifies that collateral. Generally, Article covers two broad categories of collateral described as tangible or intangible property. Tangible property includes firm assets such as cars, equipment, inventory, and goods. In the case of a security interest in money, perfection requires possession. Intangible property includes accounts receivable, promissory notes, securities, letters of credit, and interests in business entities. The two principal forms of perfection are (1) the secured party’s possession of the collateral and (2) the filing of a financing statement with the secretary of state, in which case the secured party receives priority over secured parties who do not file a financing statement or who file a financing statement later in time.