One of 87 bills that Governor Spencer Cox signed into law on March 23, 2026, H.B. 474 makes significant modifications to Utah’s Uniform Commercial Code (UCC) to more accurately “reflect the realities of modern commerce” (Senator Kirk A. Cullimore, 2026 General Session, Day 44).
When H.B. 474 goes into effect on May 6, 2026, it will fill a notable gap in the UCC by creating a Chapter 12 of the UCC known as “Uniform Commercial Code – Controllable Electronic Records” (CER). CER will allow a creditor to obtain and perfect security interests in digital assets (Digital Assets), such as cryptocurrency, but lenders and their legal counsel need to have a firm grasp on CER’s provisions to be able to take advantage of them.
Before explaining H.B. 474, however, brief background on “secured lending” is warranted.
When a debtor enters bankruptcy proceedings, the assets of that debtor are divided amongst interested parties according to “priority”, which is the legal term for describing how parties line up against each other in competition for a debtor’s assets. Creditors, which are parties who have a contractual right to payment or performance, have priority over other interested parties, such as common stockholders. Creditors who have a security interest in one or more assets of the debtor, i.e., secured creditors, have priority in payment over creditors who do not have a security interest in those assets. The general rule for determining priority among secured creditors competing for an asset is “first in time, first in right,” meaning the secured creditor who obtains its security interest in the asset first has an interest that is superior to all subsequently obtained security interests.
With respect to assets that constitute personal property, versus real property (such as land, buildings, and permanent fixtures), the UCC governs priority, or decides the “line order”, between competing secured creditors. Per the UCC, secured creditors who have perfected their security interests in personal property assets by appropriately filing a UCC financing statement containing a description of such assets, obtaining possession or control over such assets, or using another method authorized by the UCC automatically have priority over all secured creditors who have not perfected their security interests, regardless of when the underlying security interests were created. Due to the unique nature of personal property, the UCC contains rules on how to obtain and perfect security interests that differ depending on the assets in question. The challenge for creditors is ensuring that they follow these rules so they can be adequately protected if their debtor goes bankrupt or otherwise needs to relinquish his, her or its assets to satisfy a secured obligation.
The impetus of H.B. 474, per the bill’s sponsors, Representative Anthony Loubet and Senator Kirk A. Cullimore, is that the UCC does not adequately describe or address Digital Assets, nor how to obtain or perfect a security interest in them. This is partly because Digital Assets do not cleanly fall into existing personal property categories in the UCC, such as “money,” “investment property” and “general intangibles.” It is also because transfers of any given Digital Asset are recorded on a blockchain (an immutable ledger found on decentralized and distributed networks), and the transfer most recently recorded on the blockchain as possessing a Digital Asset control that asset. This runs directly against the traditional rule for determining priority among security creditors, which gives highest priority to the secured creditor whose interest was first recorded. This practical challenge together with inadequate personal property categories indicates that the UCC is not suited for the current digital market.
While several other states have already recognized and cured these deficiencies by updating their UCCs, Utah had not until the enactment of H.B. 474, which passed nearly unanimously at every level of the legislative process.
As a high-level overview, H.B. 474 will create a new category of property called “controllable electronic records” and implement accompanying provisions that will allow a creditor to (a) obtain security interests in Digital Assets by describing them as “controllable electronic records” in underlying security agreements and (b) perfect such interests by obtaining “control” over such records in one of at least two ways, including by receiving acknowledgement from a party with control over such records (other than the debtor) that such party will exercise control on behalf of the creditor.
While H.B. 474 provides a timely solution to a growing concern for creditors lending against Digital Assets, its provisions are technical and nuanced. So, creditors and debtors alike can expect to grapple with adopting the new CER regime over the coming years and should seek the guidance of experienced legal counsel to ensure they adequately follow its provisions. H.B. 474’s proponents are optimistic that as practitioners and professionals become more comfortable with implementing the CER regime, its provisions will allow Utah to sit at the forefront of the country’s emerging financial technology markets.
Travis is a member of the firm’s banking & finance and real estate practices and regularly assists clients in financing and real estate transactions. Travis works closely with clients to provide legal guidance on commercial finance transactions, real estate financing, joint ventures, and real estate acquisitions, sales, developments, and leasing. To contact Travis, send an email to tcorbin@parsonsbehle.com or call 801.532.1234.