Editing Uniform Commercial Code (section)

==Article 12: Controllable Electronic Records==

Article 12 is a recent addition to the UCC, introduced as part of the 2022 UCC Amendments to accommodate digital assets and blockchain technology in commercial transactions. The amendments were approved by the American Law Institute (ALI) in May 2022 and the Uniform Law Commission (ULC) in July 2022, and are being progressively adopted across U.S. states.<ref>{{cite web|url=https://www.uniformlaws.org/committees/community-home?communitykey=1457c422-ddb7-40b0-8c76-39a1991651ac|title=UCC and Emerging Technologies 2022 Amendments|publisher=Uniform Law Commission}}</ref>

Article 12 creates a new category of personal property called "controllable electronic records" (CERs), defined as "a record stored in an electronic medium that can be subjected to control."<ref name="Tosato2024">{{cite journal |last1=Tosato |first1=Andrea |last2=Odinet |first2=Christopher K. |year=2024 |title=Crypto and the Property Question |journal=Florida Law Review |volume= |issue= |pages= |url=https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5151907 |page=39}}</ref> This definition has three essential components: (1) "Record" - information that is stored in a medium and retrievable in perceivable form; (2) "Electronic" - technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities; and (3) "Control" - the ability to avail oneself of substantially all the benefit from the electronic record, prevent others from availing themselves of substantially all the benefit, and transfer both previous powers to another person.<ref name="Tosato2024p41">{{cite journal |last1=Tosato |first1=Andrea |last2=Odinet |first2=Christopher K. |year=2024 |title=Crypto and the Property Question |journal=Florida Law Review |volume= |issue= |pages= |url=https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5151907 |page=41}}</ref> The concept of control is central to Article 12 and functions similarly to possession of tangible goods in traditional property law.<ref name="Dick2024">{{cite journal |last1=Dick |first1=Diane Lourdes |last2=Odinet |first2=Christopher K. |last3=Tosato |first3=Andrea |year=2024 |title=Debt Tokens |journal=University of Pennsylvania Law Review |volume= |issue= |pages= |url=https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4694629 |page=40}}</ref>

Article 12 establishes several key principles for CERs. First, in terms of transfer of rights, a purchaser of a CER acquires all rights that the transferor had or had power to transfer.<ref name="Tosato2024p41"/> Second, under the "take-free rule," a "qualifying purchaser" (one who obtains control of a CER for value, in good faith, and without notice of competing claims) takes the CER free from any property claims held by third parties.<ref>{{cite journal |last1=Tosato |first1=Andrea |last2=Odinet |first2=Christopher K. |year=2024 |title=Crypto and the Property Question |journal=Florida Law Review |volume= |issue= |pages= |url=https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5151907 |page=42}}</ref> Third, regarding use as collateral, security interests in CERs can be perfected either by filing a financing statement or by taking control of the CER, with control-based perfection having priority over filing-based perfection.<ref>{{cite journal |last1=Dick |first1=Diane Lourdes |last2=Odinet |first2=Christopher K. |last3=Tosato |first3=Andrea |year=2024 |title=Debt Tokens |journal=University of Pennsylvania Law Review |volume= |issue= |url=https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4694629 |pages=42-43}}</ref>

Article 12 also introduces two important concepts that enable tokenization of payment rights. "Controllable accounts" are rights to payment for goods or services that are evidenced by a CER, where the obligor agrees to pay the person who controls that CER.<ref>{{cite journal |last1=Dick |first1=Diane Lourdes |last2=Odinet |first2=Christopher K. |last3=Tosato |first3=Andrea |year=2024 |title=Debt Tokens |journal=University of Pennsylvania Law Review |volume= |issue= |pages= |url=https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4694629 |page=44}}</ref> "Controllable payment intangibles" are general intangibles under which the principal obligation is monetary payment, evidenced by a CER, where the obligor agrees to pay whoever controls that CER.<ref>{{cite journal |last1=Dick |first1=Diane Lourdes |last2=Odinet |first2=Christopher K. |last3=Tosato |first3=Andrea |year=2024 |title=Debt Tokens |journal=University of Pennsylvania Law Review |volume= |issue= |pages= |url=https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4694629 |page=44}}</ref> Both of these innovations allow for the creation of digital assets that legally represent rights to payment, making possible assets like "debt tokens" that can represent claims in bankruptcy proceedings.<ref>{{cite journal |last1=Dick |first1=Diane Lourdes |last2=Odinet |first2=Christopher K. |last3=Tosato |first3=Andrea |year=2024 |title=Debt Tokens |journal=University of Pennsylvania Law Review |volume= |issue= |pages= |url=https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4694629 |page=45}}</ref>

Article 12 represents a significant evolution in U.S. commercial law, moving away from traditional common law categories like "choses in possession" and "choses in action" toward a more functional approach that prioritizes alignment with market practices.<ref>{{cite journal |last1=Tosato |first1=Andrea |last2=Odinet |first2=Christopher K. |year=2024 |title=Crypto and the Property Question |journal=Florida Law Review |volume= |issue= |url=https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5151907 |pages=4-5}}</ref> It provides a legal framework for digital assets that directly addresses the challenges of ownership, transfer, and financing of blockchain-based assets. The creation of this new category addresses longstanding uncertainty in the legal status of digital assets, particularly cryptocurrencies, NFTs, and other blockchain-based tokens.<ref>{{cite journal |last1=Tosato |first1=Andrea |last2=Odinet |first2=Christopher K. |year=2024 |title=Crypto and the Property Question |journal=Florida Law Review |volume= |issue= |url=https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5151907 |pages=33-34}}</ref> Rather than trying to fit these novel assets into traditional property categories, Article 12 creates a new framework specifically designed for their unique characteristics.