Stablecoins in Commercial Transactions: UCC Issues With Formation and Payments on Blockchain, Regulatory Framework

Recording of a 90-minute premium CLE video webinar with Q&A


Conducted on Monday, August 2, 2021

Recorded event now available

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Course Materials

This CLE course will discuss stablecoins in the context of commercial transactions, with a particular focus on UCC rules regarding 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 stablecoin.

Description

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 where 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.

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

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Outline

  1. How a stablecoin is created
  2. Applying UCC concepts to stablecoin payments
    1. UCC Articles 3, 4, and 4A: settlement finality, adverse claims, discharge of the obligation
    2. Article 8: investment securities
  3. Bank regulatory concerns
  4. Securities regulatory concerns
  5. Central Bank Digital Currencies

Benefits

The panel will review these and other key issues:

  • How does a stablecoin vary from other cryptocurrencies, and how does it retain a stable value?
  • What are some issues to consider when making payments on the blockchain?
  • How can a bank take possession of custody as security for a loan?
  • When will a stablecoin be regarded by regulators as a security? A commodity?

Faculty

Nunn, Robin
Robin Nunn

Partner
Morgan, Lewis & Bockius

Ms. Nunn is Co-Leader of the firm’s Banking Industry Team. Her practice focuses on complex civil litigation,...  |  Read More

Simmons, Rebecca
Rebecca J. Simmons

Partner
Sullivan & Cromwell

Ms. Simmons practices in the firm’s Financial Services and Capital Markets Groups, is head of its payments...  |  Read More

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Strafford will process CLE credit for one person on each recording. All formats include course handouts.

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