Investors have long been accustomed to borrowing to finance the purchase of securities. Therefore, they may assume that the rules are the same when borrowing to buy virtual currency. Unfortunately, this is not the case at the moment.

When an investor borrows against either securities or virtual currency, the resulting security interest is governed by Articles 8 and 9 of the Uniform Commercial Code. However, when Article 9 was most recently revised, the use of virtual currency as collateral was in its infancy. Neither the Article 9 revisions nor the 2010 amendments to Article 9 clarified exactly what steps the lender must take to perfect security interests in virtual currency held in a custodial account for a borrower. The lack of resolution on these steps presents issues for both investors and their lenders.