Technology affects various facets of the society and law. It has been tightly coupled in a symbiotic relationship with commercial law, including the Uniform Commercial Code (U.C.C.). While the conceptual framework of the U.C.C. and its realist ethos has fostered innovation since the 1950s, recent technological advances pose new challenges. In particular, digital assets traded in decentralized blockchain systems promise to engender a wide array of applications, prompting new business practices.
A number of efforts have been recently undertaken to address the fundamental challenges to established legal concepts posed by these technological advances. All these efforts march forward grappling with a similar set of substantive issues, including what actions should the law recognize for a transferee to acquire a digital asset, such as Bitcoin. This article identifies the appropriate form in which commercial law should be expressed, including rules and standards. It identifies decentralized legislative solutions embedded in the U.C.C., analyzes how they have supported the growth of systems for the holding and transfers of various types of electronic records, and then applies the relevant solutions to particular issues concerning the use of digital assets, defined as controllable electronic records, in commercial transactions.
Decentralization of systems pits centralized commercial law in the form of bright-line and mandatory rules against decentralized solutions of party autonomy, standards, and system rules that enable parties to tailor the law to their needs. The article argues that rules in the form of principled norms should govern the legal effect of transfers on third-party claims, particularly non-participants in systems. It isolates a particular type of a standard that it labels a “technology standard” which enables the system design to concretize the standard ex ante. Technology standards are suitable to establish when and how a person acquires rights to a digital asset. The highest form of decentralized legislative solutions in the form of system rules would be appropriate only for central bank digital currencies that have the characteristics of the systematically important institutions. This article argues that decentralization of commercial law does not undercut one of the primary aims of the U.C.C., which is to make the law uniform, and enables evolution of the relevant regulatory rules.
Toward Decentralized Commercial Law For Digital Assets,
Nw. J. Tech. & Intell. Prop.