Legal scholars at OCC symposium say UCC 2022 amendments narrow, but don’t erase, risks of tokenizing rights

At a morning panel on legal foundations at the Office of the Comptroller of the Currency symposium, private‑law scholars said the recent Uniform Commercial Code (UCC) amendments provide targeted, limited legal tools for some tokenized rights but do not convert every digital token into recognized property.

Jonathan Fink, who moderated the session and identified the panel’s focus on private‑law foundations, said tokenization raises “foundational” questions about ownership and negotiability that courts and legislators are only beginning to settle. Professor Juliet Morangiello and other panelists traced tokenization’s lineage to longstanding legal devices such as checks and bills of lading and argued that the law’s response should preserve the functional rules that make commerce work.

Panelists framed the 2022 UCC amendments as a pragmatic, narrowly tailored reform: they created the category of a “controllable electronic record,” and, under specified control conditions, made certain payment rights and account‑type intangibles behave more like negotiable instruments. As Edwin Smith explained, the amendments let a qualifying transferee who gains legal “control” of an electronic record take the rights that record embodies with the same adverse‑claim protections familiar from negotiable instruments and Article 8 securities law.

At the same time, scholars repeatedly warned about overbroad market claims. Andrea Tassato emphasized that absent statutory or clear common‑law recognition, many market offerings that represent themselves as transferring property will remain contractual promises; buyers whose tokens fail to carry the promised rights typically have only unsecured breach‑of‑contract claims in bankruptcy. “These platforms are just buying off the claims,” he said, characterizing many tokenized bankruptcy‑claim offerings as commercially and legally risky for customers.

Panelists flagged practical points for lawyers and policymakers. They singled out custody and bankruptcy disputes that have arisen when exchanges or custodians failed: courts have looked to contract terms and the economic realities of custody to decide whether customers or intermediaries own certain crypto assets. The panel argued that clearer ex ante structuring — for example, treating customer positions as financial assets credited to accounts under Article 8 — could avoid later dispute and preserve customers’ claims in insolvency.

Why it matters: The session underscored that tokenization can change how transfers are made but cannot, on its own, change substantive property law. For use cases that depend on recognized property rights (copyright, certain real‑estate interests, intellectual property), token issuers and buyers should not assume a token’s transfer automatically conveys ownership unless the relevant statutes or doctrines explicitly provide for that result. The panel urged regulators, drafters and market participants to pursue technology‑neutral rules that focus on underlying rights and on clear definitions of who holds control and what remedies follow from its loss.

Next steps: Panelists recommended that market participants who design tokenization structures identify the specific private‑law rights at stake, document how those rights are represented in code or contract, and coordinate with regulators and courts to test whether proposed structures achieve the intended legal effect.