Thread by @Andrea_Tosato

El Salvador has recognized Bitcoin as legal tender. Historic. The Spaces chat with @nayibbukele was incredible. Shoutout to @nic__carter

As the dust settles, let’s talk a little more about what this means for US commercial law and why I think we need to reform the UCC. A thread

1/ UCC1-201(a)(24) defines “money” as “medium of exchange currently authorized or adopted by a domestic or foreign government. The term includes a monetary unit of account established by an intergovernmental organization or by agreement between two or more countries”

2/ As the Salvadorean #BitcoinLaw has recognized Bitcoin as legal tender, is it now “money” under the UCC? What would the implications be? Good/bad?

3/ The good: applying UCC rules for “money” to Bitcoin would have some positive implications, in theory. Under the UCC, “money” is negotiable and it can be easily used as collateral in financial transactions

4/ In particular, “negotiability” is key for commercial circulation. As @CaitlinLong_ has stressed, the crypto-community wants the law to treat Bitcoin as “negotiable” – to have better legal coverage when using it as a medium of exchange

5/ The not so good: as observed by Prof Schroeder and recently @JoeCarlasare, UCC rules for “money” assume that it is a tangible thing (ie banknotes/metal coins) and link its negotiability and use as collateral to a person taking “possession” of "money"

6/ The ugly: Under the UCC, “possession” is only possible for tangible goods. Bitcoin isn’t tangible. So, if Bitcoin were classified as “money”, yet it were not possible to take “possession” of it…. no Bitcoin negotiability and no use as collateral. This would be a bad outcome

7/ So what happens with UCC/Bitcoin/“money” after the Salvadorean #BitcoinLaw!?!? Admittedly, we are in a grey area

8/ As a matter of interpretation, even after the #BitcoinLaw, I agree that it would be preferable not to extend the UCC concept of “money” to cover Bitcoin. Imho, current UCC rules for “money” just don’t work with Bitcoin (see @Joecarlasare)

9/ But if we do that…under the UCC, Bitcoin is treated as a “general intangible”…and UCC “general intangibles” do not have the benefit of negotiability. This outcome is not positive either.

What is the solution? How do we fix this?

10/ The solution is reforming the UCC. Rather than adapting and stretching old rules and definitions, it’s preferable to craft new ones designed for digital assets such as Bitcoin that effectively serve both community and market needs

11/ GOOD NEWS: ALI/ULC are ALREADY working on reforming the UCC focusing on new tech. including Bitcoin (bit.ly/3gd6udq). Great crypto folks are providing input (@CaitlinLong_ @propelforward @Prof_CarlaReyes @profjuliet and many others). I expect updates in July!