The Uniform Commercial Code (UCC) is a “set of rules that governs commercial transactions involving personal property.” The Code has been adopted in some variation by all fifty states.[1] States use the Code as a model for their own statutes, which are then enacted and given legal effect in their individual jurisdictions.[2] Organizations, such as the American Law Institute (ALI) and the Uniform Law Commission (ULC), are dedicated to keeping commercial law both modernized and “uniform.” The groups “monitor developments” in the law and meet regularly to “update the [Code] when necessary” to address modern needs.[3]

Among the most recent updates to the UCC is the addition of Article 12. Introduced to the Code as part of the 2022 amendments, Article 12 governs and clarifies digital asset transactions.[4] Ultimately, the ALI and ULC’s final version of Article 12 was proposed to reduce the risks of inevitable disputes among “claimants to electronic records and their related rights and other benefits.”[5] Importantly, Article 12 meaningfully addresses longstanding uncertainty surrounding the perfection and priority of secured creditors’ interests in crypto currency. As digital assets become increasingly integrated into mainstream commerce and investment, the amendment reflects a deliberate effort to modernize the Code and align it with evolving financial practices and technological realities. As of mid-2025, the market capitalization of crypto assets has surpassed $3.5 trillion, with “28% of American adults” owning crypto assets, and “46% of [adults familiar with digital assets] believing Trump will boost mainstream cryptocurrency adoption in the U.S.”[6]

Indeed, it is essential to ensure that crypto assets can be used as collateral in secured transactions, and that secured creditors have confidence that their interests remain properly perfected in a debtor’s crypto assets throughout transactions. Currently, three states have legislation pending, and thirty-three have enacted the 2022 amendments, including Article 12.[7]

Pre- Article 12:  Digital Assets as “General Intangibles”

Prior to the 2022 amendments, creditors attempting to secure crypto assets as “general intangibles,” faced great uncertainty over whether they were properly perfected in the collateral. In fact, the UCC provided little clarity or guidance on how to enforce rights to digital assets serving as collateral.[8] For example, the only way a secured party could perfect a security interest in a digital asset was by filing a financing statement. [9] This remains true for creditors in states that have not adopted Article 12. Yet, this method of perfection poses tricky issues for creditors.  Specifically, perfection by filing permits the debtor to maintain exclusive control of the digital asset and thereby retain the ability to move such assets instantaneously across wallets. This can leave the secured creditor with an unenforceable interest should it become too difficult to locate the digital asset. And though a subsequent purchaser of the digital asset would be subject to the secured creditors’ security interest, Article 9 did not provide the subsequent purchaser with a “take free” rule.[10]

UCC Article 12: Digital Assets as “Controllable Electronic Records”

Today, Article 12 provides clarity when “a secured party perfect[s] a security interest in digital assets” and ensures its priority status.[11] However, to fall within Article 12, the asset must be a “controllable electronic record” (CER),[12] a “subset of what often is referred to as [a] digital asset.” [13] Included as a new term in the UCC, Section 12-102(a)(1) defines a CER as follows:

[A] record stored in an electronic medium that can be subjected to control under Section 12-105. The term does not include a controllable account, a controllable payment intangible, a deposit account, an electronic copy of a record evidencing chattel paper, an electronic document of title, electronic money, investment property, or a transferable record.[14]

By definition CERs include cryptocurrencies (e.g., Bitcoin), non-fungible tokens (NFTs), and “other digital assets with embedded payment rights.”[15]

Article 12 provides a secured party with two means to perfect a CER:  by filing a financing statement or by obtaining “control.”[16] To have “control” of a CER, the secured party must satisfy the following requirements:

The power to avail itself of substantially all the benefit from the CER; The exclusive power to prevent others from availing themselves of substantially all the benefit of the CER; The exclusive power to transfer control of the CER; and The ability readily to identify itself (by name, number, cryptographic key, account number or otherwise) as the person having these powers.[17]

In essence, having “control” of a CER like Bitcoin, may require the secured party  to hold the public and private keys to the digital asset. [18]

Article 12 also filled the gap to address Article 9’s lack of a clear “take free” rule. Now, if a subsequent purchaser “obtains control a CER for value, in good faith, and without notice of a property claim to the CER” then such purchaser “takes free” of claims to the CER.[19]

Therefore, the UCC 2022 amendments help maintain and modernize the law by introducing Article 12, which provides new mechanisms for creditors to secure debtor’s digital assets as collateral. By allowing creditors to layer perfection methods of traditional financing statement filing with perfection by control, Article 12 strengthens secured creditors protection in digital asset collateral. It is essential that the remaining jurisdictions complete the adoption of the 2022 amendments and that secured creditors are properly advised on how CERs may be perfected.

[1] Uniform Commercial Code (UCC), Duke L., https://law.duke.edu/lib/research-guides/ucc (last visited Jan. 11, 2026).

[2] Id.

[3] Sandra Feldman, UCC Adds Article 12 and Other Amendments to Address Emerging Technologies, WOLTERS KLUWER (Jan. 6, 2026), https://www.wolterskluwer.com/en/expert-insights/uniform-commercial-code-ucc-amended-to-address-emerging-technologies.

[4] Feldman, supra note 3.

[5] Uniform Commercial Code Amendments (2022) with Prefatory Note and Comments, A.L.I. & UNIF L. COMM’N, at 229 (June 1, 2023), https://www.restructuring-globalview.com/wp-content/uploads/sites/21/2023/10/UCC-Amendments_2022_Final-Act-with-Comments_8-1.pdf.

[6] Crypto-Assets Monitor, INT’L MONETARY FUND (May 23, 2025), https://www.imfconnect.org/content/dam/imf/News%20and%20Generic%20Content/GMM/Special%20Features/Crypto%20Assets%20Monitor.pdf; Brett Cruz & Gene Petrino, 2025 Cryptocurrency Adoption and Consumer Sentiment Report, SECURITY (Nov. 21, 2025), https://www.security.org/digital-security/cryptocurrency-annual-consumer-report/.

[7] Feldman, supra note 3.

[8] Kimberly Lowe, Understanding Article 12 of the UCC: Digital Assets, Controllable Electronic Records, and What It All Means, AVISEN LEGAL (Jan. 3, 2025), https://www.avisenlegal.com/understanding-article-12-of-the-ucc-digital-assets-controllable-electronic-records-and-what-it-all-means/#:~:text=Article%2012%20is%20a%20new,have%20exclusive%20control%20over%20it.

[9] Chris Daniel et al., UCC Article 12: How States are Regulating Digital Asset Transactions, PAUL HASTINGS (Jan. 17, 2025), https://www.paulhastings.com/insights/crypto-policy-tracker/ucc-article-12-how-states-are-regulating-digital-asset-transactions.

[10] Id.

[11] Feldman, supra note 3.

[12] Uniform Commercial Code Amendments (2022) with Prefatory Note and Comments, A. L. I. & UNIF L. COMM’N, at 229 (June 1, 2023), https://www.restructuring-globalview.com/wp-content/uploads/sites/21/2023/10/UCC-Amendments_2022_Final-Act-with-Comments_8-1.pdf.

[13] Id.

[14] Id. at 235–36.

[15] Lowe, supra note 8.

[16] Feldman, supra note 3.

[17] Daniel et al., supra note 9; Uniform Commercial Code Amendments (2022) with Prefatory Note and Comments, supra note 5, at 245–46.

[18] Daniel et al., supra note 9.

[19] Feldman, supra note 3.