Perfecting Bitcoin

Bitcoin is still here. The price of Bitcoin rebounded-setting a record high of $19,783.21 per Bitcoin inDecember 2017 before dropping to a price of $8,690 perBitcoin as of March 22, 2018. Moreover, legal andregulatory developments, like New York's BitLicense andfederal taxation of virtual currency as property, can beviewed as legitimizing its use. The normalization ofvirtual currency is evidenced by its increasinglymainstream applications.

Virtual currency can be usedas a faster and lower cost method of transferringfundsdomestically and internationally. A growing number ofretailers now accept virtual currency as a method ofpayment. In addition, more and more investors aretrying to capitalize on the price volatility of virtualcurrency by buying and selling it as a speculativeinvestment. Recognizing the potential of this growingmarket of users, investment in virtual currencybusinesses and startups has also risen.

Even traditionalfinancial institutions and the New York Stock Exchangehave invested-participating in a funding round forCoinbase that raised $75 million dollars.Putting aside the normative question of whether thenormalization of virtual currency is desirable, aninescapable truth remains. Virtual currency is apresent reality. It has the potential to disrupt a rangeof traditional industries and implicate a host of legalissues. But to date, the legal and regulatory treatmentof virtual currency has been limited.

Developments in virtual currency law have focused almost exclusively onvirtual currency in the context of money transmissionand the twin regulatory objectives of crime preventionand consumer protection.Outside of this space, the discussion about andimplementation of an appropriate legal framework isrelatively undeveloped. Secured transactions are aprime example of a significant commercial practice thatis currently being affected by virtual currency-specifically, the use of virtual currency as collateral. Itis increasingly likely that debtors, both individuals andorganizational,will hold virtual currency. Because ofthis, creditors must now deal with the realities ofensuring that they have attached, perfected and havepriority over a debtor's virtual currency.

If creditorsare unable to navigate this process, they risk losing outon the monetary value of the virtual currency upon adebtor default. Unfortunately, the UniformCommercial Code was not drafted with virtualcurrency in mind and it has not been optimized in anyway to expressly account for it. Therefore, thoseengaged in secured transactions are in the position ofhaving to evaluate and interpret how the existingprovisions of the Uniform Commercial Code mightapply to virtual currency.This Article expands the conversation by pushingbeyond the confines of current developments in virtualcurrency law and regulation. In doing so, it considersbroader commercial law implications of virtualcurrency.

Specifically, this Article provides a solutionfor the present and future of virtual currency collateralunder Article 9 of the Uniform Commercial Code. ThisArticle sets forth a roadmap for dealing with theuncertainties of virtual currency collateral underArticle 9 as it exists today. In addition, it advances aframework for optimizing Article 9 for virtual currencycollateral by recognizing it as a distinct collateral typeand creating special rules based on the concept of"control" which already applies to other collateral types. Since U.S. policymakers have already opted toaccommodate (rather than ban) virtual currency, thisArticle seeks to ensure that the discussion does notoverlook the commercial law implications of virtualcurrency.

In doing so, this Article highlights theimportance of and advances the development of acomprehensive and appropriately-scaled set of lawsand regulations applicable to virtual currency in theUnited States.