How Would You Like to Pay? The Risks of Lending to Borrowers Who are Paid in Crypto

As the adoption of cryptocurrencies as a medium of exchange continues to expand within our economy, more and more companies are now accepting payment in digital currencies from their customers. Today you can use cryptocurrency to buy movie tickets, your morning latte or even a new electric vehicle.

However, lenders to borrowers that accept (or may in the future accept) crypto in exchange for goods and services must be aware of how this burgeoning form of decentralized finance is treated under applicable law. Though often used as a substitute for government-issued currencies, cryptocurrencies are not “money” under the Uniform Commercial Code, and are instead categorized as a “general intangible.” The result of that distinction has important implications on the creation, perfection, and priority of a lender’s lien on rights to receive payment in cryptocurrency.