HJUD-260511-1300

This meeting of the House Judiciary Committee will now come to order. The time is now 1:01 PM on Monday, May 11th, 2026. We are meeting in the Grunberg Room, Capitol Room 120. The following members are present: Representative Vance, Representative Mina, and myself, Representative Gray, Chair. We do not have a quorum to conduct business.

I would like to recognize the staff supporting this meeting: Sophia Tenney from House Records, Kyla Tupo from the Juneau LIO, and my committee aide, Dylan Hitchcock Lopez. Our only item of business today is Senate Bill 252, UCC Secured Transactions Electronic Records, sponsored by Senator Clayman. At this time, I would like to invite Senator Clayman and his staff, Carly Dennis, to the witness table. Please put yourself on the record and begin your testimony.

Good afternoon, Mr. Chair and members of the House Judiciary Committee. I'm Matt Clayman, Senator for Senate District H, West Anchorage. Thank you for We are hearing Senate Bill 252 today. The Uniform Commercial Code, or the UCC, is a set of rules, and for those of us who have suffered through law school, this is what you arrive at when you start school, is a copy of the Uniform Selected Commercial Statutes, which includes the Uniform Commercial Code.

Um, it's a set of rules governing commercial transaction that has been adopted in nearly identical form by all 50 states. Uniformity of law is essential for interstate transaction of business. Because the UCC has been universally adopted, businesses can enter into contracts with confidence that the terms will be enforced in the same way by the courts of every American jurisdiction. The Uniform Commercial Code was drafted in 1951. Pennsylvania became the first state to adopt the UCC in 1953, and every other state adopted it within the next 20 years.

Alaska adopted the Uniform Commercial Code in 1967. As commerce evolves, the Uniform Law Commission and the American Law Institute periodically recommend amendments to the Uniform Commercial Code. Senate Bill 252 incorporates amendments that the Uniform Law Commission and the American Law Institute recommended in 2018 and 2022. The 2022 amendments create a new chapter governing controllable electronic record, or CERs. Examples of CERs are virtual currencies, non-fungible tokens, and electronic promises to pay.

The amendments provide rules to determine the rights of a person who receives a CER and for the perfection and priority of security— security interest in a CER. The updated law will help stimulate economic activity by providing legal certainty to these increasingly common transactions. The 2022 amendments facilitate transactions using distributed ledger technology but are drafted using technologically neutral language. This means the amendments will accommodate the technologies known today and will remain relevant for future technological technological developments. Importantly, these amendments are not regulatory in nature.

The bill provides a framework for private parties wishing to do business using new technologies, but they do not dictate the rules of commerce.

The 2018 amendments seek to resolve a potential conflict governing secured transactions in which a partnership or LLC is pledged as collateral. If interest in a business is used to secure a loan and default occurs, business partners could be forced into business with a stranger. The 2018 amendments resolve this by separating an economic interest from a governance interest and ensuring that only the economic interest is transferable, not the governance interest. These UCC amendments reflect the efforts of the American Law Institute and the Uniform Law Commission in conjunction with approximately 350 knowledgeable advisors and stakeholder observers who met dozens of times over a 3-year period to reach consensus on updates to this crucial area of state law. 16 Other states have adopted the 2018 amendments and 32 other states have adopted the 2022 amendments.

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. Adopting these amendments will promote commercial activity for emerging technologies and will provide a clear framework for our business community. It will help to ensure that Alaska is open and ready for business. And with that, thank you very much. Thank you, Senator Clayman.

For the record, we were joined by Representative Costello at 1:02 PM and Representative Underwood at 1:04 PM. In the interest of time, we will not be asking Ms. Dennis to read the entire sectional. We can read that on our own. Are there any questions for the sponsor before we move to invited testimony?

We will move to invited testimony. Uh, Mr. Edwin Smith Would, uh, Uniform Law Commissioner, uh, from Massachusetts, would you please take yourself off mute, place yourself on the record, and begin your testimony? Thank you very much, uh, Mr. Chairman and committee members, and I'm delighted to be able to testify before this committee. I was the chair of the committee that drafted the 2022 amendments. Uh, it was a 3-year project We had huge input from the legal community, government regulators, practitioners, academicians, those involved in the marketplace.

This— these amendments were really in response to what we were hearing in the marketplace. As you've just heard, the Uniform Commercial Code is critical to our private commercial law. And we were hearing that it just wasn't working for modern technologies, that we needed to address digital assets. We needed to address the negotiability of some of those assets like cryptocurrency and stablecoins. We needed to deal with secured transactions where a lender takes a pledge of those assets.

We also needed to deal with some trade finance issues, especially electronic promissory notes that people wanted to use during the pandemic but found obstacles because current law required a writing. Generally, the Uniform Commercial Code had to be modified to deal with distributed ledger technology. And although we are— have drafted the statute to be technologically neutral, it is broad enough to pick up distributed ledger technology. And then there were a number of requirements throughout the Uniform Commercial Code that required a writing. That just didn't make sense anymore.

And an electronic record, which could either be in writing or electronic, was substituted. I'll make one friendly amendment to the testimony that you heard. The amendments have now been adopted by 34 states and the District of Columbia, and we would certainly welcome the State of Alaska to join the other states in modernizing its Uniform Commercial Code. Thank you, Mr. Chair.

Thank you, Mr. Smith. For the record, we were joined by Representative Eishide at 1:08 PM. Let the record reflect we do have a quorum to conduct business. Mr. Smith, I have a question for you. Can you, just speaking to the non-attorneys on the committee, give us a couple of concrete examples of negative consequences to Alaska not adopting these amendments?

Sure. You could have residents of Alaska that want to use stablecoins or other cryptocurrency, especially now that we have federal legislation for payment stablecoins. There is no current commercial law that cuts off adverse property claims on the transfer ownership of those cryptocurrencies. If someone hacks into my computer and steals my Bitcoin or my stablecoin and transfers it to you and you transfer it to someone else, I can go out and claim it and say that's mine. But that's not how people deal with those particular assets.

They deal with them as a medium of exchange, as if they're money. And the concern is that Alaskan residents could be prejudiced by not having those— the benefit of those adverse claim cutoff rules. There are those who lend against those assets because they are considered to be eligible collateral. The rules without the 2022 amendments are quite cumbersome. But they're streamlined under the 2022 amendments so that lenders can have more confidence lending against those particular assets.

For trade finance, much of trade finance today is conducted electronically, and parties want to use electronic bills of exchange and promissory notes. Alaskan residents can be disadvantaged if they weren't weren't able to do that with the benefit of the 2022 amendments. And then generally there are provisions that permit documents of title like warehouse receipts and bills of lading and chattel paper, which are generally leases of goods, auto leases, to be conducted electronically using distributed ledger technology. Business transactors would not be able to take advantage of distributed ledger technology for those transactions without the benefit of the 2022 amendments. So that will give you a little idea of the types of transactions that would benefit Alaskan residents if the 2022 amendments were adopted.

Thank you, Mr. Smith. Are there any further questions from committee for our invited testifier for the sponsor. Representative Vance. Thank you, Mr. Chairman. I have a question for the bill sponsor, and I'm just, uh, of what I can see from this bill, it's obvious that we need it.

But a question— my question is more around some of the definitions, and, uh, I'm— my question is kind of, kind of go sideways. We've had discussions about AI, and, and that some AI systems, while they're very beneficial, there's a concern about them becoming autonomous. And I've read reports where AI systems hacked different cryptocurrency and things like that. And I was wondering what your position is on putting protections, some kind of language to help prevent against that type or add protection against that type of activity, because this is helping modernize and streamline so that we can use digital assets so that those transactions— I get that. But there's a concern that we need some belts and suspenders on the use of AI when it goes autonomous.

And I just want to know, what can you tell me about how this bill could interact with that? I will actually call for the lifeline of our invited testifier. The specifics— I mean, the specifics— part of the bill is to make it so that if, say, you and I have a business trans— through the chair, Senator or Representative Vance— if you and I have a— I sell you my car and we agree to pay that by virtual currency rather than just dollars that we got from a bank. The structure of this is, is so that there's a framework in which to deal with the fact that we chose to do that by virtual currency. And, and I believe the UCC provisions under the amendments would have provisions of how do we deal with the fact that I look in my cryptocurrency and it looks like I have 100 of whatever it is, and you look in your cryptocurrency for some reason because AI shows that you only got 75, the structure of these amendments allows us to resolve that difference without having to come to the legislature and say, what do we do?

But I think our invited testifier may be able to provide more insight than what I just said. Mr. Smith. Well, first of all, this is a really important question, but it's not one that the Uniform Commercial Code can adequately solve. The Uniform Commercial Code is really dealing with private commercial law and not regulatory law, or to a large extent, consumer protection. And it doesn't deal per se with artificial intelligence.

Artificial intelligence could be imposed on all sorts of commercial transactions wholly apart from these 2022 amendments. So I think that the issue that you're rightly raising is more of a broader issue than the Uniform Commercial Code itself can address, and I'm not sure that this is the right place even to address it, although it's certainly an important issue.

Yes, thank you for that answer, and I, I understand. It just It's, it's the first question that came up in my mind as we are moving towards these systems of, of digital and using AI for a variety of means that we need to have some sort of protection. But I do have a follow-up question, Mr. Chair, or a separate question. It has to do with the definitions and definitions of person and there's a lot, and this is Section 21, page 7, and there's, right, there's, I don't know, 4, 5 lines there.

Person includes protected series. How— can you put this in layman's terms for us? Help us understand what this change means.

Uh, Mr. Sponsor, would you like me to address that issue? Please. Yeah, um, there are a number of states, Delaware in particular, uh, that have created what are called series entities. So let me give you an example.

You have a limited par— uh, a limited liability company, and that limited liability company will create individual cells. Each of these cells is like its own— it's called a series, uh, and that cell has its own assets and its own liabilities, even though it's part of the mothership, even though it's part of the limited liability company. And parties will transact with the series, with a particular series of that entity, but not with other series of the same organization or with the mothership organization. So the idea was to make sure that if a series, let's say, granted a security interest in its assets, uh, that was recognized as a separate person and didn't really interfere with the assets of other series or of the mothership. Now, even though, uh, Alaska— I'm not sure— has embarked on having series organizations.

The fact is that they are fairly prevalent, especially in the investment management area with mutual funds, so that I think that the idea is to provide confidence for people who deal in those particular series as opposed to the mothership.

Thank you for that question, Representative Vance.

I'm tracking. I am. Thank you, Mr. Chairman.

And just— I— the reason that I ask about person is because we have had the discussions in this committee about whether or not an odd autonomous, these AI systems could be considered a person legally that are created by a corporation. And, and I want to make sure that we are not inadvertently allowing these autonomous AI systems to have legal standing. And I had not seen the definition of person like this before. So I appreciate that. One more question, Mr. Chairman.

Thank you. Section 20 is talking about money and does not include an electronic record, mean of exchange. Could you put that section of the definition of money in layman's terms as well? Mr. Smith. Sure.

Before giving effect to the 2022 amendments, the definition of money was a medium of exchange, medium of exchange that was authorized by government as fiat currency. Uh, we were quite surprised a number of years ago that El Salvador and the Central African Republic decided that they would make Bitcoin their fiat currency. And so technically that became money under the UCC. That was not a happy day. Uh, so we amended— we added an amendment to the definition of money in these 2022 amendments to say that if you have a cryptocurrency that already exists and a government adopts it as a fiat currency, that's not money under the UCC.

That's a controllable electronic record that the sponsor must as you mentioned, and it is governed by a separate set of rules. Um, uh, now the Central African Republic and El Salvador have since rescinded doing what they did, but we still have the amendment because it can happen again.

Thank you. Any other questions from committee members? Representative Costello. This is for the sponsor. Is there any opposition that you are aware of to this legislation?

Through the chair, Representative Costello, no, we haven't received any opposition. We've received broad support and recognition because this is really not in the world of government regulation. It's more just having pieces in place so that businesses can be working on the same— on the same level when they do have disputes. Okay, thank you. Any other questions?

Mr. Smith, thank you so much for being here today and for your testimony, and thank you to the sponsor and Carly Dennis staff for being here. Uh, I will set an amendment deadline on this bill for Thursday, May 14th at 5 PM, and we will now set SB 252 aside and bring it back up at a later date. That concludes today's business before the committee. Before we adjourn, here's a preview of our upcoming meetings. On Wednesday, May 13th, we will hear House Bill 325, Industrial Hemp, by Representative McCabe, and consideration of Governor's appointee to the Judicial Council, Mike Miller.

We'll probably do those in the opposite order. And then on Friday, please note that HB 159, Property Possession and Property Crimes, has been removed from Friday's calendar at the request of the sponsor. My office will be in touch later this week to confirm if we have anything on the calendar on Friday. The time is now 1:21 PM, and this hearing of the House Judiciary Committee is adjourned.