Pub. 18 2023-2024 Issue 2

Based on the framework for existing distributed ledger technology, control can be obtained by the creation of a multi-signature arrangement that holds the CER. A multi-signature arrangement is a code-based contractual relationship that establishes the authorized signatories (who each hold a distinct cryptographic private key6) and how many of those signatories (or distinct cryptographic private keys) are required to authorize a transfer or other disposition of the CER representing the digital asset. Although the word exclusive is used for purposes of acquiring control of a CER, the power can still be exclusive even if the secured party has agreed to share the power with another person. For example: Authorized Signatories Required Signatories to Transfer the CER Does Secured Party Have Control? Secured Party, debtor and third-party custodian Two signatories, one of which must be secured party Yes, because the CER cannot be transferred without the consent of the secured party Secured party and debtor Two signatories Yes, because the CER cannot be transferred without the consent of the secured party If, however, the multi-signature arrangement is among the secured party, debtor and third-party custodian and allows any one of authorized signatories to act, the secured party does not have control because the debtor can transfer the CER without the consent of the secured party. While the method of obtaining control of a CER may not read the same as a traditional method of control under the UCC (i.e., a written control agreement), the underlying purpose is the same — to enable the secured party to exclude the debtor or other third parties from disposing of the CER without the secured party’s consent. Please note that, in July 2022, an updated version of Article 12 (Updated Article 12) prepared by the drafting committee was approved by the Uniform Law Commission Jacqueline Pueppke represents clients in connection with a broad variety of commercial financing and real estate transactions. She represents national, regional and local lending institutions and borrowers in structuring and documenting transactions for commercial real estate financing, construction financing, asset-based financing and agricultural financing. She also represents clients in the acquisition, sale and leasing of commercial real estate. Nicholas Buda’s practice focuses on creditors’ rights and commercial litigation, the Uniform Commercial Code, commercial real estate disputes, construction law, and appellate advocacy. He routinely assists lending and financial institutions with working out problematic loans and collecting overdue commercial accounts. Justin Sheldon focuses his practice on commercial real estate, asset based and agricultural financing transactions. He represents both lenders and borrowers in negotiating and structuring transactions. and American Law Institute and several states. Updated Article 12 maintains the same concept of control of a CER described in this article but is more expansive and provides greater guidance on transactions utilizing CERs. In Nebraska, LB94 was introduced in January 2023 to adopt Updated Article 12. LB94 progressed through several steps of the legislative process, but due to unforeseen legislative delays, did not pass in the 2023 legislative session.  1. Ben Stinar, LeBron James NBA Top Shot Sells for Over $387,000, Sports Illustrated, April 16, 2021, https://www.si.com/nba/ pacers/news/lebron-james-nba-top-shotsells-for-over-387000 2. IBM: Blockchain, https://www.ibm.com/ topics/blockchain 3. IRS: Digital Assets, https://www.irs.gov/ businesses/small-businessesself-employed/digitalassets#:~:text=Digital%20assets%20are%20 broadly%20defined,Stablecoins 4. See Neb. Rev. Stat. U.C.C. § 12-101, et seq. 5. Neb. Rev. Stat. U.C.C. § 12-105(a)(1)-(2) 6. A private cryptographic key is a numerical code used in cryptography to gain access to your crypto wallet to verify transactions and prove ownership, which should be kept secret, similar to a PIN. 23 Nebraska Banker

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