Floating Liens Over Crypto-in-Commerce

Commercial law and crypto are colliding. Against the backdrop of explosive growth (and discord) in the digital asset market, there has been a series of recent revisions to American commercial law aimed at addressing new and emerging technologies. These changes to the Uniform Commercial Code (UCC) are designed to facilitate the buying and selling of digital assets as well as their use as collateral. However, to date, the literature exploring these changes has mainly focused on understanding the basics of the new regime. This Essay moves beyond that baseline by showing how the UCC amendments can be used to structure more complex secured credit arrangements that tap into the borrowed capital potential of blockchain technology. Specifically, this study explains how these recent law reforms—in concert with the inherent capabilities of distributed ledgers, smart contracts, and cryptography—can be used to create a floating lien (the quintessential financing device in American commercial law) over crypto-in-commerce. We demonstrate how blockchain technology enables real-time monitoring and automated enforcement mechanisms that could revolutionize traditional inventory financing. The Essay explores the technical and legal requirements for creating effective floating liens over digital assets, including issues of attachment, perfection, and priority. We also address practical challenges such as the volatility of crypto assets, the need for adequate collateral valuation methods, and the coordination between blockchain-based security interests and traditional UCC filing systems. Our analysis reveals that while the UCC amendments provide a solid foundation, additional private ordering and market practices will be essential to realize the full potential of floating liens in the crypto economy.