Stablecoins in Commercial Transactions: UCC Formation and Payments; Banking and Securities Regulations

This CLE course will discuss stablecoins in the context of commercial transactions, with a particular focus on UCC rules governing the settlement of payments, adverse claims, discharge of underlying obligations, and security entitlement. The panel discussion will include the current regulatory framework around stablecoins and blockchain and how it impacts financial transactions with stablecoins.

Cryptocurrencies like Bitcoin offer an accessible and borderless way to make payments, but price volatility and unpredictable transaction costs render them impractical for day-to-day use. Stablecoins are digital assets pegged to the value of another asset, often the U.S. dollar, thus increasing their acceptance as a medium of exchange in commercial transactions. Still, stablecoins present legal and regulatory issues.

Stablecoins differ from traditional financial infrastructures, in which transactions run through a licensed intermediary. They straddle the divide between currencies on the one hand and investment securities and commodities on the other. Counsel should understand the regulatory framework around stablecoins, including how they might be categorized by securities regulators and the current rules and guidance regarding custody and engagement by banks in blockchain networks.

Counsel must fully grasp fundamental concepts regarding settlement finality, rules for adverse claims, discharge of the underlying obligation, and the concept of a security entitlement. UCC Article 8 (securities) and UCC Articles 3, 4, and 4A (payment, adverse claims) offer a framework for understanding the rights and obligations of the parties to a transaction involving stablecoin. In addition, the 2022 UCC Amendments included the creation of Article 12 and the category of a controllable electronic record (CER). Our faculty will examine these UCC articles and recent amendments to provide counsel with a clear understanding of the UCC framework for stablecoin treatment. Time will be spent analyzing the requirements of the GENIUS Act and the Bank Secrecy Act (BSA), as well as anti-money laundering and countering the financing of terrorism (CFT) requirements that practitioners need to consider when advising clients on engaging in commercial transactions involving stablecoins. 

Listen as our authoritative panel discusses the transactional and regulatory issues related to stablecoins and best practices for counsel when transacting with these digital currencies.