Impact of El Salvador’s Adoption of Bitcoin on U.S. Lending Market


On June 5, 2020, El Salvador’s President Nayib Bukele announced that the country would be adopting Bitcoin as legal currency.[1] Days later, in order to move ahead of any organized opposition,[2] El Salvador’s legislature passed the bill that made Bitcoin legal tender in El Salvador in addition to the U.S. Dollar.[3] This was only the latest of a series of actions President Nayib Bukele had taken regarding Bitcoin that captured the attention of the world’s major financial institutions.[4] In the aftermath of this hastily passed bill, there has been international fallout from the IMF and World Bank regarding the financial and restructuring assistance they had planned to lend El Salvador[5] as well as implications for the hugely important remittances to El Salvador from the U.S.,[6] which make up 20% of El Salvador’s GDP.[7] All of this aside, this blog focuses on the implications El Salvador’s adoption of Bitcoin has for lenders right here in the U.S. who have no connection whatsoever with El Salvador.

These implications stem from Article 9 of the Uniform Commercial Code (UCC), a standardized set of business laws that has been fully adopted in every state but Louisiana.[8] Article 9 of the UCC governs security interests by regulating the creation and enforcement of such interests in moveable or intangible property and fixtures.[9] Sections 9-310 and 9-312 of the UCC set out the ways in which a secured party may perfect (make enforceable) their interest in different kinds of collateral.[10] For perfection purposes, Bitcoin has traditionally been treated as a “general intangible” under Article 9.[11] This means that in order to perfect a security interest in Bitcoin, a lender would file a UCC financing statement in the correct jurisdiction in order to put other potential lenders on notice of the secured party’s interest in that wallet.[12] However, under Article 9, the only way to perfect a security interest in “money,” which is defined in the UCC as “a medium of exchange currently authorized or adopted by a domestic or foreign government,”[13] is to actually possess the money.[14] Thus, since El Salvador has adopted Bitcoin as legal tender,[15] it would appear that Bitcoin now constitutes “money” under Article 9 of the UCC.

Since intangible money cannot be possessed,[16] it would technically be impossible to possess Bitcoin because it does not have a physical form.[17] Thus, if Bitcoin should now be considered money instead of a general intangible, since it is a medium of exchange adopted by a foreign government,[18] then perfection of a security interest in Bitcoin would simply be impossible since it cannot be possessed.[19] This would leave future borrowers unable to pledge their Bitcoin as collateral to any smart lender since lenders are unlikely to accept as collateral anything they cannot perfect a security interest in.[20] This revelation also leaves current lenders, who have taken security interests in Bitcoin to the tune of $30 billion globally[21] prior to El Salvador’s adoption of Bitcoin as currency, in the dark as to whether their security interests are still perfected.

Anticipating the chaos this adoption could cause, given Bitcoin’s rise in both popularity and value in the last few years, the Permanent Editorial Board for the Uniform Commercial Code (PEB) issued an opinion and revision of the official comments to UCC Article 9 trying to make sense of the bewildering implications of El Salvador’s adoption of Bitcoin as legal currency.[22] Since treating Bitcoin as money would lead to the result that security interests in Bitcoin would become impossible to perfect, PEB concluded that the drafters of Article 9 intended for “money” to include only tangible forms of currency.[23] This solution would allow Bitcoin to continue being treated as a general intangible for perfection purposes thus allowing security interests in it to be perfected by filing a financing statement.[24]

Though elegant and seemingly the only logical solution to this conundrum, PEB’s opinion does not resolve this issue. While the UCC, as drafted by National Conference of Commissioners on Uniform State Laws (NCCUSL) and the American Law Institute (ALI), has been adopted verbatim in all but one state,[25] courts have held that the official comments to the UCC are not governing law.[26] Thus, while the official comment as amended by PEB[27] may be instructive as to how courts should handle issues of security interests in Bitcoin, judges cannot escape the fact that the plain language of the code now suggests that Bitcoin is indeed “money,” and thus, can only have a security interest in it perfected by possessing the Bitcoin, which is in fact impossible.[28] Since there is no case law or formal legal authority on the issue,[29] each state’s court will have to grapple with whether to set aside the plain language of the code and take PEB’s approach as cases arise. For now, lenders—past, present, and future—wait with anticipation to learn the fate of their security interests.

[1] See David Gerard, El Salvador’s Bitcoin Law Is a Farce, Foreign Policy: Analysis (Sept. 17, 2021, 2:39 PM),

[2] See Stuart Russel, Coercion and coexistence: How El Salvador’s Bitcoin Law may change global finance, CoinTelegraph: Magazine (July 20, 2021),

[3] See id.

[4] See id.

[5] See id.

[6] Deric Behar et al., El Salvador Christens Bitcoin as Legal Tender, JD Supra (June 25, 2021),

[7] See Tom Wilson, EXCLUSIVE El Salvador bitcoin transfers soar, but still a fraction of dollar remittances, Reuters: Tech. (June 14, 2021, 10:24 AM),,according%20to%20the%20World%20Bank.

[8] See Adam Hayes, Article 9, Investopedia (Oct. 28, 2021),

[9] Id.

[10] See U.C.C. §§ 9-310, 9-312.

[11] “’General intangible’ means any personal property, including things in action, other than accounts, chattel paper, commercial tort claims, deposit accounts, documents, goods, instruments, investment property, letter-of-credit rights, letters of credit, money, and old, gas, or other minerals before extraction.” U.C.C. § 9-102(a)(42). See also Jeanne L. Schroeder, Bitcoin and the Uniform Commercial Code, 24 U. Miami Bus. L. Rev. 1, 38 (2016) (“If bitcoin is neither money nor a deposit account, it can only fall within the catchall category of ‘general intangibles,’ which is defined as personal property that does not fall within any other category.”).

[12] See U.C.C. § 9-310(a).

[13] U.C.C. § 1-201(b)(24).

[14] U.C.C. § 9-312(b)(3).

[15] See Russel, supra note 2.

[16] Permanent Editorial Board for the Uniform Commercial Code, Draft For Public Comment, at 3 (Aug. 5, 2017), [hereinafter PEB Commentary].

[17] See Behar et al., supra note 6.

[18] See U.C.C. § 1-201(b)(24).

[19] See PEB Commentary, supra note 16, at 1.

[20] See Behar et al., supra note 6.

[21] See Banking on Bitcoin: The State of Bitcoin as Collateral, Arcane Rsch. 3 (2021),

[22] See generally PEB Commentary, supra note 16.

[23] See id. at 2 (positing that the drafters of Article 9 certainly did not intend “to create a category of security interests with respect to which perfection was impossible”).

[24] See id.; Schroeder, supra note 11, at 38-40.

[25] See Hayes, supra note 8.

[26] See Sean M. Hannaway, Jurisprudence and Judicial Treatment of the Comments to the Uniform Commercial Code, 75 Cornell L. Rev. 962, 967 (1990).

[27] See PEB Commentary, supra note 16 at 3 (“Because money in intangible form would have no physical location and would not be susceptible of being possessed, subsections (2) and (3) apply only to money in tangible form, with the result that the general choice-of-law rule in Section 9-301(1) would apply to the perfection, the effect of perfection or non-perfection, and the priority of a security interest in money in intangible form.”).

[28] See e.g., Behar et al., supra note 6.

[29] Joe Carlasare & Eric Fogel, The Impact Of El Salvador Recognizing Bitcoin As “Legal Tender” On U.S. Law, JD Supra (June 8, 2021),


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Fordham Journal of Corporate & Financial Law