Relating to commercial transactions, including control and transmission of electronic records and digital assets

CONTROLLABLE ELECTRONIC RECORDS —— BACKGROUND. The 2022 Act creating new Article of the UCC, in part included amendments to Article providing general provisions applicable throughout the UCC, and amendments to Article governing secured transactions, as prepared by a committee appointed jointly by the uniform law commission and the American law institute. The Act provided for forms of electronic property sometimes referred to as digital assets including non-fiat currency and blockchain based non-fungible tokens, commonly referred to as NFTs, and transactions involving sale to a purchaser (qualified purchaser) and associated payment obligations (a controllable payment intangible) by an account debtor. Note, the UCC does not use the term “intangible property” but “personal property” which includes general intangibles, including controllable electronic records. Iowa’s new Article is connected to Article 9, which allows a creditor to obtain a security interest attached to a debtor’s personal property as collateral and to obtain priority when enforcing that security interest over other creditors having a security interest in that same collateral.9102, the term “account” means having a present and future right to a payment based on the transfer of services or property including by sale or lease, and includes accounts receivable, but excludes an item represented by a negotiable instrument or chattel paper. The term “payment intangible” (under the catchall term “general intangible”) means a debtor’s principal obligation is the payment of money and includes a controllable payment intangible. An account debtor is a person who owes an obligation on an account, chattel paper, or intangible property. Chattel paper is a debt obligation supported with a security interest in tangible property and includes electronic chattel paper evidenced by an electronic record. An electronic record cannot include electronic money operating as a medium of exchange before being authorized or adopted by a governmental entity. Like a controllable electronic record, electronic money is perfected by rules of control rather than rules of possession traditionally governing forms of tangible personal property. CONTROLLABLE ELECTRONIC RECORDS —— BILL’S PROVISIONS. The bill eliminates several terms, including “electronic chattel paper” and substitutes the term used to complete a document from “authenticate” to “sign”.14107). The bill defines a number of terms used throughout the UCC, including “money”.9628).15306). REGULATION OF DIGITAL ASSETS —— BACKGROUND. The 2022 Act regulating transactions involving distributed ledger technology and smart contracts is connected to Article 14. In both cases, the medium of exchange is a digital asset. Distributed ledger technology allows different computers to validate transactions and update records and a smart contract is a type of electronic record that executes the term of a contract, including the transfer of assets. A digital asset is a form of an electronic record that represents or is used as a medium of exchange, unit of account, method of payment, or store of value.1).3).4). REGULATION OF DIGITAL ASSETS —— BILL’S PROVISIONS. The bill amends the definition of “digital asset” by eliminating exceptions recognized by the UCC including electronic records evidencing chattel paper. The bill provides that a digital asset is classified simply as personal property rather than intangible personal property. Finally, the bill defines “electronic services system” by citing its source in the Iowa Acts.