New York Enacts 2022 UCC Amendments: A New Era for Digital Asset Transactions

Modernizing Commercial Law for Digital Assets

On December 5, 2025, Governor Hochul signed Assembly Bill 3307-A/Senate Bill 1840-A into law, making New York the latest—and most influential—jurisdiction to enact the 2022 Amendments to the Uniform Commercial Code (UCC). This landmark legislation modernizes New York’s UCC to address digital assets, including e-notes, stablecoins, cryptocurrencies, electronic tokens, and other emerging technologies. With this action, New York joins more than 30 other states and the District of Columbia in providing a clear, modern legal framework for commercial and financial transactions involving digital assets.

Key Features of the Legislation

• Adoption of New Article 12: Controllable Electronic Records (CERs)
  Article 12 creates a comprehensive legal framework for the transfer, control, and use of digital assets—referred to as “controllable electronic records” (CERs)^[1]—including virtual currencies, NFTs, tokenized payment rights and electronic promissory notes (“e-notes”).
• Clarity for Secured Lending and Commercial Transactions
  The amendments provide clear rules for perfecting and prioritizing security interests in digital assets, allowing lenders and investors to confidently use digital assets as collateral, and reducing transaction costs and legal uncertainty.
• “Control” as the Gold Standard
  The new law enables parties to perfect a security interest in digital assets by “control,”^[2] a concept tailored to digital assets and distributed ledger technology, and grants priority to secured parties who have control, even over prior filers.
• “Take-Free” Rules for Qualifying Purchasers
  A purchaser who acquires control of a digital asset for value, in good faith, and without notice of adverse claims will take the asset free of competing property claims—mirroring the free negotiability protections for traditional financial assets.
• Treatment of Electronic Money
  The amendments distinguish between privately issued cryptocurrencies and “electronic money” (such as central bank digital currencies), providing clear rules for perfection and transfer.
• Modernization of UCC Terminology
  The amendments update the UCC to recognize electronic records and signatures, and clarify that the legal treatment of electronic transactions are on equal footing with paper-based transactions.
• Transition Rules and Uniformity
  The law includes transition provisions to protect existing priorities and provide a grace period for parties to adapt to the new rules.

Who Is Affected by the New Legislation?

• Purchasers
  Anyone acquiring digital assets—including businesses, individuals, and institutional buyers—will benefit from clear “take-free” rules and enhanced certainty regarding ownership and transfer.
• Lenders and Secured Parties
  Banks, fintech lenders, and other secured creditors can now confidently accept digital assets as collateral, knowing their security interests can be perfected and prioritized through control.
• Investors and Asset Managers
  Funds, asset managers, and other investors in digital assets will benefit from increased liquidity, legal certainty, and the ability to use digital assets in structured finance and investment transactions.
• Issuers, Developers, and Fintech Companies
  Entities issuing or developing digital assets—including fintech companies that issue, sell, or pledge electronic promissory notes (“e-notes”)—will have a clear legal framework for structuring offerings, managing risk, and facilitating secondary market transactions.

What Types of Digital Assets Are Covered?

The new rules apply to a broad range of digital assets, including:

• Cryptocurrencies: Bitcoin, Ethereum, stablecoins, and other blockchain-based tokens.
• Non-Fungible Tokens (NFTs): Digital collectibles, digital art, music, and other unique digital assets.
• Tokenized Payment Rights: Electronic promissory notes (“e-notes”), electronic bills of exchange, and other tokenized receivables.
• Controllable Accounts and Payment Intangibles: Payment rights evidenced by a controllable electronic record, where the obligor has agreed to pay the person in control of the record.
• Electronic Money: Central bank digital currencies (CBDCs) and other government-issued digital currencies.
• Other Digital Tokens: Utility tokens, security tokens, digital coupons, tokenized fractional interests, and more.

Chattel Paper: Key Changes for Electronic and Hybrid Transactions

The amendments also make important changes to the treatment of chattel paper (e.g., auto loans or leases, equipment leases, and similar financing transactions), including electronic chattel paper:

• Revised Definition:
  Chattel paper is now defined as the right to payment of a monetary obligation secured by specific goods or arising under a lease of goods, rather than the physical or electronic record itself. This more closely aligns the law with modern practices, where chattel paper may exist in tangible form, electronic form, or as a hybrid.
• Perfection by Possession and Control:
  The amendments eliminate a rigid distinction between “tangible” and “electronic” chattel paper:
  • To perfect a security interest in chattel paper (and to obtain priority over other claimants), a secured party must have possession of all authoritative tangible copies and control of all authoritative electronic copies.
  • “Control” for electronic chattel paper is now defined in a manner similar to control of CERs, focusing on the ability to identify authoritative copies and prevent unauthorized changes.
• Hybrid Transactions:
  The new rules address situations where chattel paper is created, stored, or transferred in both tangible and electronic forms, providing clarity and flexibility for equipment finance, auto leases, and other asset-backed transactions.

New York’s Unique “Take-Free” Rule

While most states follow the national model for “take-free” rules, New York’s UCC includes a unique and more protective standard for purchasers of negotiable instruments and, now, for purchasers of controllable electronic records that would be negotiable instruments if in writing.

What’s different in New York?

Under New York’s UCC § 3-304(7), a purchaser is considered to have notice of an adverse claim or defense only if the purchaser actually knows of the claim or defense or has knowledge of such facts that taking the asset would amount to bad faith. This means that, in New York, a qualifying purchaser of a digital asset (such as an e-note or other CER) will take free of prior property claims unless they have actual knowledge or are acting in bad faith—a high standard to challenge where mere suspicion or constructive notice is not enough.

Why does this matter?

This standard provides greater certainty and protection for good-faith purchasers and lenders, making New York law especially attractive for digital asset transactions and purchasers of digital assets. It reduces the risk that a purchaser could lose their rights because of facts they “should have known,” and instead focuses on actual knowledge and good faith conduct.

Non-Uniform, New York-Specific Features

While New York’s amendments closely track the national model, several important non-uniform provisions reflect New York’s unique legal environment:

• Integration with New York’s Electronic Signatures and Records Act (ESRA):
  Unlike other states, New York has not adopted the Uniform Electronic Transactions Act (UETA). The amendments include special provisions to ensure that digital assets and electronic records are recognized under ESRA and that the new rules do not conflict with existing New York law.
• Tailored Transition and Effective Date Provisions:
  New York’s transition rules are customized to ensure continuity and protect parties’ expectations under pre-existing law.

When Does the Law Become Effective?

The new law becomes effective 180 days after enactment—on June 3, 2026. Certain transition provisions, including a one-year “adjustment date” grace period for secured transaction priority rules, will apply to allow parties time to adapt to the new regime.

Tailored Transition Rules: What Are They and Why Do They Matter?

New York’s adoption of the 2022 UCC Amendments includes transition rules that are specifically designed to protect the expectations and priorities of parties to transactions entered into before the new law takes effect. These transition rules are particularly important for lenders, investors, and other parties with existing security interests in digital assets, chattel paper, or other forms of collateral that will be governed by the new law.

If you are a lender, investor, or other party with existing interests in digital assets or other collateral, New York’s tailored transition rules give you time and a clear path to adapt to the new law—protecting your interests and ensuring a smooth transition to the new legal regime.

What Are the Transition Rules?

• Delayed Effective Date:
  The new law becomes effective 180 days after enactment—on June 3, 2026. This gives market participants time to review and update their documentation and procedures.
• Adjustment Date Grace Period:
  In addition to the effective date, New York’s law provides for a one-year “adjustment date” (one year after the effective date- until June 3, 2027). During this period, the priority of security interests that were perfected under the old law (for example, by filing a financing statement) is preserved—even if a new method of perfection (such as “control” of a digital asset) would otherwise give a later party priority under the new law.
• Preservation of Existing Priorities:
  If you had a perfected security interest in a digital asset, chattel paper, or other collateral before the new law takes effect, your priority position will not be lost immediately when the new law becomes effective. Instead, you will retain your priority until the adjustment date (June 3, 2027), giving secured parties time to take any necessary steps (such as obtaining “control” of a digital asset) to maintain your position.
• Continued Validity of Pre-Existing Transactions:
  Transactions, liens, and interests that were valid under the old law remain valid after the new law takes effect. Parties can continue to enforce and complete these transactions as if the new law had not yet been enacted.However, after the adjustment date, you may lose your priority to another party that obtains control.
• Opportunity to Re-Perfect or Amend:
  The transition rules give secured parties a window to amend their filings, obtain control, or otherwise update their documentation to comply with the new law and preserve their priority.

Why Do These Rules Matter?

• Protects Existing Lenders and Investors:
  Without these transition rules, a lender or investor who perfected their interest under the old law could suddenly lose their priority to a new party who perfects by “control” under the new law. The transition rules prevent this abrupt loss of priority.
• Provides Time to Adapt:
  The adjustment date grace period gives all parties time to review their current positions, consult with counsel, and take any necessary action to ensure continued protection under the new legal framework.
• Reduces Legal and Commercial Risk:
  By preserving existing rights and priorities during the transition, New York’s rules reduce the risk of unexpected litigation, loss of collateral, or disruption to ongoing business relationships.
• Encourages Orderly Market Transition:
  The rules ensure that the shift to the new law is smooth and predictable, supporting confidence in New York as a global commercial and financial center.

Recommendations: What Should Purchasers, Lenders, and Investors Do Now?

• Review Existing Agreements:
  Parties should review current security agreements, collateral documentation and digital asset holdings to determine whether updates are needed to comply with the new control and perfection requirements.
• Assess Collateral and Lien Priorities:
  Lenders should evaluate whether their interests in digital assets—including e-notes and chattel paper—are properly perfected and consider taking steps to obtain “control” under the new law to ensure priority.
• Update Transaction Documentation:
  Purchasers, investors and fintech companies should ensure that transaction documents reflect the new legal framework, including provisions for control, transfer and discharge of obligations.
• Mark and Track Digital Assets:
  Consider “marking” controllable electronic records or notating systems to evidence interests and prevent inadvertent loss of priority.
• Monitor Transition Dates:
  Pay close attention to the law’s effective date (June 3, 2026) and the adjustment date (June 3, 2027) for priority rules to avoid losing priority to other parties who obtain control.
• Engage Counsel Early:
  Consult with legal counsel to ensure compliance, update internal policies and procedures, and take advantage of the new opportunities created by the law.

Bottom Line

New York’s adoption of the 2022 UCC Amendments is a landmark development that will provide legal certainty, support innovation and reinforce New York’s status as a global leader in commercial and financial law. Purchasers, lenders, investors, and fintech companies should begin preparing now to preserve their existing positions and take full advantage of the new legal framework for digital assets.