Government of the District of Columbia
UNIFORM LAW COMMISSION
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October 3, 2022
The Honorable Phil Mendelson
Chairman
Council of the District of Columbia
The John A. Wilson Building,
1350 Pennsylvania Avenue, NW
Washington, DC 20004
RE: Request for introduction of Uniform Commercial Code Amendment Act of 2022
concerning transactions in digital assets based on emerging technologies.
Dear Chairman Mendelson:
Pursuant to Rule 401(b)(1) of the Rules of Organization and Procedure for the
Council, this is to request, on behalf
ofthe District of Columbia Uniform Law Commission,
that you introduce the proposed Uniform Commercial Code Amendment Act of 2022.
The National Conference of Commissioners on Uniform State Laws (NCCUSL) has just
completed these important amendments to the Uniform Commercial Code (the UCC
Amendments) to address commercial transactions involving digital assets based on
emerging technologies. These include cryptocurrency, non-fungible tokens, and electronic
promises to pay. Amendments to the UCC are needed to ensure that these digital assets
are negotiable and to provide that a security interest may be created in them by control.
The prompt enactment of the UCC Amendments by the Council is especially important
because the District of Columbia plays a critical national role in this legislation as the
default filing jurisdiction for all commercial transactions in the country subject to the UCC
for which no jurisdictions law is specified to govern.
The UCC has been enacted in every jurisdiction of the United States in essentially
the same form and is the backbone of commerce in the country. Becauseof the unique
legal challenges posed by transactions involving digital assets based on emerging
technologies, NCCUSL undertook an extensive analysis of the law with the participation
of hundreds of stakeholders. The UCC Amendments are the result of this process. They
include a new Article 12 to the UCC, entitled Controllable Electronic Records and
conforming and related amendments to other articles of the UCC, including Article 9
Secured Transactions. To ensure that the UCC remains relevant, controllable electronic
records are defined to include not only digital assets using todays distributed ledger or
blockchain technology but also any assets that may function similarly using future
technologies.
The proposed act also includes two narrow amendments to Part 4ofArticle 9 of the
UCC concerning enforcementofsecurity agreements against interests in partnerships and
limited liability companies, D.C. Code 28:9-406, 28:9-408, by making it clear that only
transferable economic interests, and not governance interests, may be used to satisfy
security interests.
A proposed Uniform Commercial Code Amendment Actof 2022 containing these
amendments to the UCC is being filed with this letter. In addition, the following documents
have been filed: (1) a short Overview of the UCC Amendments; (2) a detailed summary
of the UCC Amendments; (3) a statement as to why the UCC Amendments should be
adopted; (4) the official version of the amendments themselves in strike and score format;
and (5) with respect to the narrow amendments to Part 4 of Article 9, a short summary of
the need for these amendments.
I would be pleased to answer any questions and to provide any additional
information requested.
Sincerely,
ON hAy.
James C. McKay, Jr.
Chair
D.C. Uniform Law Commission
ce: Uniform Law Commissioners
FS cwudsHsune
Cifirman Phil Mendelson at the requestof the
District of Columbia Uniform Law Commission
ABILL
IN THE COUNCIL OF THE DISTRICT OF COLUMBIA
To amend the Uniform Commercial Code, Subitle I ofTitle 28ofthe District of Columbia Code,
to add a new Article 12Controllable Electronic Records, to provide rules for
transactions involving digital assets, including cryptocurrency, non-fungible tokens, and
electronic promises to pay, and to provide for their negotiability and their perfection by
control; to make conforming and related amendments to Article 1General Provisions,
Article 2Sales, Article 2ALeases, Article 4AFunds Transfers, Article 5Letters
of Credit, Article 7DocumentsofTitle, Article 8Investment Securities, and Article
RRREeyes
9Secured Transactions; to provide transition rules to protect the expectationsofparties
to existing transactions; to amend provisons of Part 4ofArticle 9 to clarify that
governance interests in partnerhips and similar entities may not be used as collateral
without consent of the co-owners; and for other purposes.
BE IT ENACTED BY THE COUNCIL OF THE DISTRICT OF COLUMBIA, That this
act may be cited as the Uniform Commercial Code Amendment Act of 2022.
Sec. 2. Subtitle I ofTitle 28ofthe District of Columbia Code is amended as follows:
(a) The tableofcontents is amended as follows:
30 (1) The section heading for 28:2-106 is amended by striking the period at the
31 end and inserting the phrase ; hybrid transaction. in its place.
(2) The section heading for 28:2-202 is amended by striking the word written.
33 (3) The section heading for 28:2A-202 is amended by striking the word
34 written.
35 (4) The section heading for 28:9-105 is amended to read as follows:
36 Controlofelectronic copy ofrecord evidencing chattel paper.
37 (5) The following new section heading is added after the section heading for
38 28:9-105:
39 28:9-105A. Control of electronic money.
40 (6) The following new section headings are added after the section heading for
41 28:9-107:
42 28:9-107A. Control of controllable electronic record, controllable account, or controllable
43 payment intangible.
44 28:9-107B. No Requirement to Acknowledge or Confirm; No Duties.
45 (7) The following new section headings are added after the section heading for
46 28:9-306:
47 28:9-306A. Law governing perfection and priority of security interests in chattel paper.
48 28:9-306B. Law governing perfection and priority of security interests in controllable accounts,
49 controllable electronic records, and controllable payment intangibles.
50 (8) The section heading for 28:9-312 is amended by inserting after the phrase
51 paper, the phrase controllable accounts, controllable electronic records, controllable payment
52 intangibles,.
53 (9) The following new section heading is added after the section heading for
54 28:9-314:
55 28:9-314A. Perfection by possession and control of chattel paper.
56 (10) The following new section heading is added after the section heading for
57 28:9-326:
58 28:9-326A. Priority of security interest in controllable account, controllable electronic record,
59 and controllable payment intangible.
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60 (11) The section heading for 28:9-331 is amended to read as follows:
61 Priority of Rights of Purchasers of Controllable Accounts, Controllable Electronic Records,
62 Controllable Payment Intangibles, Documents, Instruments, and Securities Under Other Articles;
63 Priority of Interests in Financial Assets and Security Entitlements and Protection Against
64 Assertion of Claim Articles 8 and 12.
65 (12) Headings for a new Article 12 are added at the end:
66 Article 12. Controllable Electronic Records.
67 Part 1. General Provisions.
68 28:12-101. Title.
69 28:12-102. Definitions.
70 28:12-103. Relation to Article 9 and consumer laws.
71 28:12-104. Rights in controllable account, controllable electronic record, and controllable
72 payment intangible.
73 28:12-105. Control of controllable electronic record.
74 28:12-106. Discharge of account debtor on controllable account or controllable
75 payment intangible.
76 28:12-107. Governing law.
77 Part 2. Transitional provisions for Articles 9 and 12.
78 28:12-201. Definitions.
79 28:12-202. Saving clause.
80 28:12-204. Security interest perfected before effective date of 2022 Act.
81 28:12-205. Security interest unperfected before effective date of 2022 Act.
82 28:12-206. Effectiveness of actions taken before effective date of 2022 Act.
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 83 28:12-207. Priority.
84 28:12-208. Priority of claims when priority rules of Article 9 do not apply.
85 (b) Article 1 is amended as follows:
86 (1) 28:1-201(b) is amended as follows:
87 (A) Paragraph (10) is amended to read as follows:
88 (10) Conspicuous, with reference to a term, means so written, displayed, or presented
89 that, based on the totality of the circumstances, a reasonable person against which it is to operate
90 ought to have noticed it. Whether a term is conspicuous or not is a decision for the court.
91 (B) Paragraph (15) is amended to read as follows:
92 (15) Delivery, with respect to an electronic document of title, means voluntary
93 transfer of control and, with respect to an instrument, a tangible document of title, or an
94 authoritative tangible copy of a record evidencing chattel paper, means voluntary
95 transfer of possession.
96 (C) A new paragraph (16A) is inserted after paragraph (16):
97 (16A) Electronic means relating to technology having electrical, digital, magnetic,
98 wireless, optical, electromagnetic, or similar capabilities.
99 (D) Paragraph (21) is amended by amending subparagraph (C) by
100 inserting after the word control the phrase other than pursuant to 28:7-106(g),.
101 (E) Paragraph (24) is amended to read as follows:
102 (24) Money means a medium of exchange that is currently authorized or adopted by a
103 domestic or foreign government. The term includes a monetary unit of account established by an
104 intergovernmental organization, or pursuant to an agreement between two or more countries. The
105 term does not include an electronic record that is a medium of exchange recorded and
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106 transferable in a system that existed and operated for the medium of exchange before the
107 medium of exchange was authorized or adopted by the government.
108 (F) Paragraph (27) is amended by to read as follows:
109 (27) Person means an individual, estate, business or nonprofit entity, government or
110 governmental subdivision, agency, or instrumentality, or other legal entity. The term includes a
111 protected series, however denominated, of an entity if the protected series is established under
112 law other than this subtitle that limits, or limits if conditions specified under the law are satisfied,
113 the ability of a creditor of the entity or of any other protected series of the entity to satisfy a
114 claim from assets of the protected series.
115 (G) Paragraph (36) is amended by to read as follows:
116 (36) Send, in connection with a record, or notification means:
117 (A) to deposit in the mail, or deliver for transmission, or transmit by any other
118 usual means of communication, with postage or cost of transmission provided for, addressed to
119 any address reasonable under the circumstances; or
120 (B) to cause the record or notification to be received within the time it would
121 have been received if properly sent under subparagraph (A).
122 (H) Paragraph (37) is amended by to read as follows:
123 (37)(A) Sign means, with present intent to authenticate or adopt a record:
124 (i) to execute or adopt a tangible symbol; or
125 (ii) to attach to or logically associate with the record an electronic
126 symbol, sound, or process.
127 (B) Signed, signing, and signature have corresponding meanings.
128 (2) 28:1-204 is amended by deleting the phrase Articles 3, 4, and 5 and
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129 inserting the phrase Articles 3, 4, 5, and 12 in its place.
130 (3) 28:1-301(c) is amended by:
131 (A) Striking the period after the word 9-307 and adding a semicolon in
132 its place; and
133 (B) Inserting the following new paragraph after paragraph (8):
134 (9) 28:12-107.
135 (4) 28:1-306 is amended by striking the phrase an authenticated and inserting
136 the phrase a signed in its place.
137 (c) Article 2 is amended as follows:
138 (1) 28:2-102 is amended to read as follows:
139 28:2-102. Scope; certain security and other transactions excluded from this article
140 (a) Unless the context otherwise requires, and except as provided in subsection (c), this
141 Article applies to transactions in goods and, in the case of a hybrid transaction, it applies to the
142 extent provided in subsection (b).
143 (b) In a hybrid transaction:
144 (1) If the sale-of-goods aspects do not predominate, only the provisions of this
145 Article which relate primarily to the sale-of-goods aspects of the transaction apply, and the
146 provisions that relate primarily to the transaction as a whole do not apply.
147 (1) If the sale-of-goods aspects predominate, this Article applies to the
148 transaction but does not preclude application in appropriate circumstances of other law to aspects
149 of the transaction which do not relate to the sale of goods.
150 (c) This article does not:
151 (1) Apply to a transaction that, even though in the form of an unconditional
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152 contract to sell or present sale, operates only to create a security interest; or
153 (2) Impair or repeal a statute regulating sales to consumers, farmers, or other
154 specified classes of buyers.
155 (2) 28:2-106 is amended as follows:
156 (A) The section heading is amended by striking the period at the end and
157 inserting the phrase ; hybrid transaction. in its place.
158 (B) The following new paragraph (5) is added after paragraph (4):
159 (5) Hybrid transaction means a single transaction involving a sale of goods
160 and:
161 (A) the provision of services;
162 (B) a lease of other goods; or
163 (C) a sale, lease, or license of property other than goods.
164 (3) 28:2-201 is amended as follows:
165 (A) Paragraph (1) is amended to read as follows:
166 (1) Except as otherwise provided in this section a contract for the sale of goods for the
167 price of $500 or more is not enforceable by way of action or defense unless there is a record
168 sufficient to indicate that a contract for sale has been made between the parties and signed by the
169 party against whom enforcement is sought or by the partys authorized agent or broker. A record
170 is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not
171 enforceable under this subsection beyond the quantity of goods shown in the record.
172 (B) Paragraph (2) is amended to read as follows:
173 (2) Between merchants if within a reasonable time a record in confirmation of the
174 contract and sufficient against the sender is received and the party receiving it has reason to
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175 know its contents, it satisfies the requirements of subsection (1) against the party unless notice in
176 a record of objection to its contents is given within 10 days after it is received.
177 (4) 28:2-202 is amended as follows:
178 (A) The section heading is amended by striking the word written.
179 (B) Subsection (b) is amended by striking the word writing and inserting
180 the word record in its place.
181 (5) 28:2-203 is amended by striking the word writing both places it appears
182 and inserting the word record in its place.
183 (6) 28:2-205 is amended by striking the word writing and inserting the word
184 record in its place.
185 (7) 28:209 is amended by amending paragraph (2) by inserting after the word
186 writing the phrase or other signed record.
187 (d) Article 2A is amended as follows:
188 (1) 28:2A-102 is amended to read as follows:
189 28:2A-102. Scope.
190 (a) This article applies to any transaction, regardless of form, that creates a lease
191 and, in the case of a hybrid lease, it applies to the extent provided in subsection (b).
192 (b) In a hybrid lease:
193 (1) If the lease-of-goods aspects do not predominate:
194 (A) Only the provisions of this Article which relate primarily to the
195 lease-of-goods aspects of the transaction apply, and the provisions that relate primarily to the
196 transaction as a whole do not apply;
197 (B) 28:2A-209 applies if the lease is a finance lease; and
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198 (C) 28:2A-407 applies to the promises of the lessee in a finance lease
199 to the extent the promises are consideration for the right to possession and use of the leased
200 goods; and
201 (2) If the lease-of-goods aspects predominate, this article applies to the
202 transaction, but does not preclude application in appropriate circumstances of other law to
203 aspects of the lease which do not relate to the lease of goods.
204 (2) 28:2A-103 is amended by amending subsection (a) by inserting after
205 paragraph (8) the following new paragraph:
206 (8A) Hybrid lease means a single transaction involving a lease of goods and:
207 (A) The provision of services;
208 (B) A sale of other goods; or
209 (C) A sale, lease, or license of property other than g