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New UCC Amendments Move Digital Assets Into the Mainstream

New UCC Amendments Move Digital Assets Into the Mainstream

By Andy Philips, General Counsel & Managing Director at LiquidX

Over the past decade, the most popular buzzword in business has been “digitization.” As emerging technologies continue to take hold, there is a clear need to implement systems that make it easier to manage and exchange digital assets – including those relating to trade finance.

Existing supply chain finance programs often rely on outdated forms of documentary evidence which need to be possessed and exchanged in physical form. This process builds in unnecessary administrative burden on participants in such programs and impacts the ease with which parties can transact.

Modern supply chain finance programs require the seamless and clear transfer of digital asset ownership. It is absolutely critical that there is one hundred percent clarity into who owns (or has the benefit of and rights to) the digital asset and when that transfer of ownership occurred.

The newly approved Uniform Commercial Code (UCC) amendments underscore the broader recognition of digitization, providing a positive step forward in moving digital assets to the mainstream.

A Summary of Amendments to UCC Filing

At this year’s annual meeting, the Uniform Law Commission approved proposed legislation from the UCC Emerging Technologies Drafting Committee. The proposed updates to the U.S. state law code bring new regulations and protections for digital assets and transactions. State adoption of the new rules are expected to go into effect as early as this fall.

Under the new amendment, there will be more clear governance relating to transactions involving digital assets such as electronic drafts, bills of exchange, and other negotiable instruments. Subsequently, the amendments address securitization of those digital assets and provide updated terminology for virtual transactions, including electronic signatures and digital records.

It’s also worth noting the international efforts to develop laws similar to the updated UCC changes. Many countries, including the UK, are working toward standardizing laws related to digital assets.

In short, there will be more clarity for digital supply chain finance transactions and the ownership of trade finance assets along with a clearer, more defined legal regime, more room for innovation in the FinTech space surrounding electronic negotiable instruments, and similar digitization opportunities.

LiquidX’s Proactive Stance on Digitization

Supply chain digitization streamlines treasury operations, improves cash forecasting and optimizes working capital. But in order to achieve that, companies must have the technology to support digital transformation.

LiquidX has long anticipated the future of digital assets and our digital platform is purpose-built to support an increasingly digital business landscape. Our InBlock solution digitizes invoices, insurance policies and other trade finance documents, and since its inception, has been at the forefront of digitization within the B2B working capital optimization and InsureTech space.

As a global company, LiquidX remains committed to both maintaining a pulse on new developments within the trade finance industry as well as consistently contributing to the international dialog regarding acceptance of digital assets in trade programs. We will continue to keep our customers and partners informed with the latest announcements that impact the trade finance community.

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