Wyoming House Bill Further Defines a Digital Asset
In 2019, Wyoming was the first state to enact blockchain-enabling laws, and to clarify the treatment of digital assets under the UCC. Recently, Wyoming enacted HB0043 (effective July 2021) which further defines a digital asset and identifies a digital asset as an intangible under UCC Article 9.
What Is a Digital Asset?
According to W.S. 34-29-101, a digital asset “means a representation of economic, proprietary or access rights that is stored in a computer readable format and is either a digital consumer asset, digital security or virtual currency.” The last part – virtual currency – may sound familiar because bitcoin or NFT (non-fungible tokens) are forms of digital assets.
Security Interest in Digital Assets
Creditors seeking a security interest in collateral containing digital assets would file a Blanket UCC and the Security Agreement must include the category of “intangibles” and may include “proceeds thereof.” Below is the text from HB0043 (emphasis added).
34-29-103. Perfection of Security Interests in Digital Assets; Control; Possession; Security Agreements; Location.
- Notwithstanding the financing statement requirement specified by W.S. 34.1-9-310(a) as otherwise applied to general intangibles or any other provision of law, perfection of a security interest in virtual currency may be achieved through possession and perfection of a security interest in digital securities may be achieved by control. A security interest held by a secured party having possession or control, as applicable, of virtual currency or digital securities has priority over a security interest held by a secured party that does not have possession or control, as applicable. Other provisions of law relating to perfection and priority of security interests, including W.S. 34.1-9-322(c) and priority of control over delivery, shall apply, except that W.S. 34.1-9-322(a)(i) and (b) shall not apply. W.S. 34.1-9-207 shall apply to this section.
- Before a secured party may take possession or control under this section, the secured party shall enter into a security agreement with the debtor and, as necessary, other parties. The security agreement may set forth the terms under which a secured party may pledge its security interest as collateral for another transaction. Consistent with W.S. 34.1-9-201(a), the security agreement shall be effective according to its terms between parties, against purchasers of collateral and against creditors.
- If a debtor is located in Wyoming, a secured party may file a financing statement with the secretary of state to perfect a security interest in digital consumer assets or digital securities, including to perfect a security interest in proceeds pursuant to W.S. 34.1-9-315(d).
- Notwithstanding any other provision of law, including article 9 of the Uniform Commercial Code, title 34.1, Wyoming statutes, a transferee takes a digital asset free of any security interest two (2) years after the transferee takes the asset for value and does not have actual notice of an adverse claim at any time during the two (2) year period. This subsection only applies to a security interest perfected by filing.
Other States Following Suit?
In a recent article Update on Nonuniform UCC Legislation for Emerging Technologies, the author reviews proposed amendments before Nebraska’s legislature. And, according to the National conference of State Legislatures (NCSL), 25 states have pending cryptocurrency legislation for the 2021 season. You can view NCSL’s list here.
