House committee hears bill to update Alaska commercial law for cryptocurrency

The Alaska House Judiciary Committee heard testimony Monday on legislation that would update the state's commercial law framework to accommodate cryptocurrency and other digital assets.

Senate Bill 252 would incorporate 2018 and 2022 amendments to the Uniform Commercial Code recommended by the Uniform Law Commission and the American Law Institute. The 2022 amendments create rules governing what the bill calls controllable electronic records. That includes virtual currencies, non-fungible tokens, and electronic promissory notes. The 2018 amendments resolve conflicts when partnership or LLC interests are pledged as collateral.

Alaska adopted the Uniform Commercial Code in 1967 but has not updated it to address digital assets. The state already adopted virtual-currency money-transmission regulations effective January 1, 2023, which require licensing for crypto businesses. SB 252 addresses a separate layer of commercial law governing private transactions and collateral.

Senator Matt Clayman, who sponsored the bill, said the 2022 amendments create a new chapter governing controllable electronic records, or CERs. Examples of CERs are virtual currencies, non-fungible tokens, and electronic promises to pay.

Edwin Smith, a Uniform Law Commissioner from Massachusetts who chaired the committee that drafted the 2022 amendments, testified that 34 states and the District of Columbia have adopted the 2022 amendments. He said Alaska residents could be prejudiced without the changes.

There is no current commercial law that cuts off adverse property claims on the transfer of ownership of those cryptocurrencies, Smith said. He described a scenario where stolen Bitcoin could be reclaimed from subsequent buyers. The concern is that Alaskan residents could be prejudiced by not having the benefit of those adverse claim cutoff rules.

Smith said the amendments also streamline rules for lenders who accept cryptocurrency as collateral and enable electronic bills of exchange and promissory notes for trade finance.

Clayman said the bill has received broad support and no opposition. The amendments are not regulatory but provide a legal framework for private parties doing business with new technologies.

It is critical that Alaska adopt these updates to the Uniform Commercial Code to keep our statutes aligned with the best practices used in the rest of the country, Clayman said.

During the hearing, Representative Vance raised concerns about artificial intelligence systems and whether the bill should include protections against autonomous AI hacking cryptocurrency. Smith responded that while the concern is important, the Uniform Commercial Code addresses private commercial law rather than regulatory issues. AI concerns extend beyond the scope of the UCC, he said.