Can the Uniform Commercial Code Help Save Bitcoin from Speculators?

As the original cryptocurrency, Bitcoin has received more than its share of exposure, including as a harbinger of the possibilities of blockchain.  Since the 2008 brainchild of Satoshi Nakamoto hit the internet, supporters of the original cryptocurrency have lauded it as the next wave of payment systems. Blockchain programming has been touted as a proof of concept for a decentralized system that, once fully realized, would displace institutional banks from their perch as payment intermediaries.

Yet today, cryptocurrency is viewed primarily as a speculative investment. To the extent vendors take cryptocurrency in day-to-day commerce, they do so not because of broad public demand, but more as a means of signaling solidarity with certain tech-savvy or libertarian segments of their customer base. Even the enthusiasm for cryptocurrency as an investment is on the wane.  According to a Bank of America report from June 2022, “[a]lmost 70% of the U.S. population hasn’t invested in crypto or isn’t interested in investing in cryptocurrencies . . . [and] it appears that many consumers haven’t participated in crypto markets and if anything, their ‘inclination toward doing so has waned’ in recent months.”[1]   Regulators have – unsurprisingly – also been less than enthusiastic about cryptocurrency as an investment vehicle.  On May 18, 2022, months before the November 2022 collapse of the FTX cryptocurrency exchange, Securities and Exchange Commission Chairman Gary Gensler told a House Appropriations Committee panel, “I fear that in crypto . . . there’s going to be a lot of people hurt, and that will undermine some of the confidence in markets.”[2]   The events in the year following the SEC Chairman’s statements have shown those fears  to have been well-founded.

In a new paper, I address the question of whether the main purpose of cryptocurrency can again be as a means of payment rather than a plaything for investors. I argue that it can. A crucial component for saving  Bitcoin as a payment system would be the widespread adoption of the 2022 amendments to the Uniform Commercial Code.[3] These amendments add new Article 12, which fill commercial law gaps for cryptocurrency to give it transactional certainty on a par with traditional checks and payment cards.

Bitcoin has suffered from a void at its outset: a lack of clear and certain commercial law that would bless cryptocurrency payments as a legally valid and enforceable means to extinguish debts.  Adoption of the 2022 amendments to the Uniform Commercial Code, particularly the addition of new Article 12 on “Controllable Electronic Records,” would resolve this problem for cryptocurrency, as well as for non-fungible tokens (NFTs) and other digital assets. If a digital asset is susceptible to exclusive control[4] through blockchain programming (as is Bitcoin, for example) or other technology, then that asset can benefit from the rules of Article 12. The rules are familiar in that they have ingeniously been adapted for the digital age from the well-established and successful negotiable instrument rules of Article 3.

A basic transfer rule of new Article 12 provides that when a party trades for Bitcoin or any other cryptocurrency, that party “acquires its rights in the controllable electronic record free of a claim of a property right in the controllable electronic record,” so long as the acquiring party is a “qualifying purchaser.”[5] To understand this provision, imagine a simple sales transaction: A merchant sells goods in exchange for Bitcoin. The merchant seller in this transaction is (perhaps a bit confusingly) the “purchaser” of Bitcoin, acquiring the token in exchange for its goods. So long as the merchant is a “qualifying purchaser” (more on that in a moment), she would take the Bitcoin from the buyer free of any other person’s claim. No liens or claims could spring up to claw back the Bitcoin any more than they could for a cash sale in dollars.  So how does one become this all-important “qualifying purchaser” who benefits from this transactional certainty? That is the ingenious part, because Article 12 provides an answer backed up by hundreds of years of well-established commercial law:

“Qualifying purchaser” means a purchaser of a controllable electronic record or an interest in a controllable electronic record that obtains control of the controllable electronic record for value, in good faith, and without notice of a claim of a property right in the controllable electronic record.[6]

In other words, the merchant in our example qualifies by being, in effect, a holder in due course,[7] a person who acquires the Bitcoin in exchange for value (here, the goods themselves), in good faith (already defined in the UCC as “honesty in fact and the observance of reasonable commercial standards of fair dealing”[8]), and without notice of a competing claim. This standard would assure the final consummation of almost all day-to-day sales transactions that do not involve some type of fraud. The same law that has successfully set the boundaries for the exchange of commercial paper for the entire modern era would now protect a Bitcoin transaction as well. Lord Mansfield himself could not have crafted a simpler and more elegant solution to incorporate cryptocurrency into commercial law and the everyday payment certainty that it provides.

If proponents of cryptocurrency wish to see it thrive as a mainstream payment system, then they would do well to press for enactment of the 2022 UCC Amendments. The choice for decentralized cryptocurrency is either to be squeezed out of the mainstream-payments realm by competitors like the rapidly approaching central bank digital currencies or to embrace the payments mainstream facilitated by reliable commercial law. Absent the Uniform Commercial Code, blockchain’s future is most likely as an endless series of speculative bubbles rather than as a consumer’s go-to method of payment.


[1] Will Canny, Bank of America Customers’ Crypto Activity Slowed as Market Slid, Coindesk (May 11, 2023, 1:03 PM),

[2] Legislative Highlights, 41 Am. Bankr. Inst. J. 10, 62–63 (2022) (“SEC Continues to Caution Investors on Cryptocurrency Amid Recent Downturn”).

[3] See generally Uniform Law Commission, 2022 Amendments to the Uniform Commercial Code,

[4] See U.C.C. § 12-105(a) (Am. L. Inst. & Unif. L. Comm’n 2022) (describing the requirements for an electronic record to be “controllable”).

[5] U.C.C. § 12-104(e) (Am. L. Inst. & Unif. L. Comm’n 2022).

[6] U.C.C. § 12-102(a)(2) (Am. L. Inst. & Unif. L. Comm’n 2022) (emphasis added).

[7] U.C.C. 3-302(a) (Am. L. Inst. & Unif. L. Comm’n 2022).

[8] U.C.C. § 1-201(b)(20) (Am. L. Inst. & Unif. L. Comm’n 2022).

This post comes to us from Professor Mark Edwin Burge at Texas A&M University School of Law. It is based on his recent article, “After FTX: Can the Original Bitcoin Use Case Be Saved?” forthcoming in the University of Kansas Law Review and available here.