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On March 27, 2023, Crain’s New York Business reported that “New York holds onto its spot as the world’s financial capital” based upon the thirty-third edition of the Global Financial Centres Index (GFCI 33). The GFCI provides evaluations of future competitiveness and rankings for 120 financial centers around the world. According to the GFCI 33, New York leads the index, with London second, Singapore third, and Hong Kong fourth. Similarly, the GFCI 33 indicated that Chicago and Boston joined New York, San Francisco, and Los Angeles in the world’s top 10. New York also retained its leading position in the Fintech ranking, followed by San Francisco, London, and Shenzhen with Los Angeles, Boston, Chicago, Shanghai, Singapore, and Washington rounding out the top 10 for FinTech.
A lot has changed since March 2023. Since that time New York’s position as the world’s financial capital has been threatened by many of the countries and states identified in the GFCI 33. Among the most important changes is that those countries and U.S. states have adopted new laws designed to promote technology in commerce and finance. In the US, for instance, in July 2022, the Uniform Law Commission (ULC) and the American Law Institute (ALI) promulgated the Emerging Technologies amendments (Model UCC Amendments) to the Uniform Commercial Code (UCC). As of today, close to two dozen states and the District of Columbia have adopted the Model UCC Amendments, with bills to enact the Model UCC Amendments pending in other states.
However, New York is not one of those states. The New York UCC has not been updated since 2014. New York now finds itself, with other jurisdictions adopted in the Model UCC Amendments, in a difficult position. New York law is becoming increasingly outdated and ill-suited to many modern financial transactions.
To retain its preeminent position, New York must act quickly to adopt the New York Emerging Technologies UCC Amendments proposed by New York Senator Brad Hoylman-Sigal in the New York Senate (S.7244-A) before the legislative session ends in June. The New York Emerging Technologies UCC Amendments are a tailored version of the Model UCC Amendments designed specifically to mesh with New York’s electronic transactions law and New York policies in favor of the free negotiability of certain payment rights.
New York commercial and financial law has long been favored by those conducting business transactions and their lawyers because of New York’s robust respect for freedom of contract and strong protections for the negotiability of commercial instruments. This has made New York the preferred U.S. jurisdiction for paper-based commercial, financial and other business transactions. Unfortunately, the same is not yet true for transactions involving digital assets such as electronic payment rights, tokenized assets, and non-fungible tokens.
Enactment of the New York Emerging Technologies UCC Amendments during the current legislative session will promote and encourage technological and commercial advances that decrease transactional costs and enhance the efficiency, certainty and security of commercial and financial transactions governed by the New York UCC. The importance of these improvements to the New York UCC cannot be overstated. Technological and commercial advances that decrease transactional costs and enhance the efficiency, certainty and security of commercial and financial transactions are major factors that are considered when market participants decide whether to choose New York as the governing law and the jurisdiction to resolve disputes and whether businesses will decide to locate to New York.
Enactment of the New York Emerging Technologies UCC Amendments during the current legislative session will also help ensure New York’s leadership in commercial and financial progress and growth and will disincentivize migration of digital commerce to other jurisdictions that more clearly promote and encourage technological and commercial advances. Every time another state adopts the Model UCC Amendments, the more likely New York risks that market participants will prefer one of those states for transactions involving digital assets. Once that business is lost to other states, it will become increasingly difficult to get it back.
Enactment of the New York Emerging Technologies UCC Amendments during this legislative session will also help persuade multinational and international market participants to choose New York law over the law of other countries, such as England, which are rapidly reforming their commercial laws to accommodate emerging technologies and electronic transactions. New York must act expeditiously to preserve and strengthen its attractiveness to multinational and international businesses.
Lorraine McGowen is Co-Chair of the New York City Bar Association’s Digital Technology Task Force.
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Lorraine McGowen , 2024-05-17 18:03:03
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