SDBA Op-Ed: ‘Bank on’ the facts: HB 1193

As the 98^th session of the South Dakota Legislature winds down, the team at the South Dakota Bankers Association (SDBA) is busy preparing for our final week of work with our state legislators. It is also during this time that we reflect on the significant role SDBA member banks and the broader business community play in helping us navigate the legislative process. We are grateful for our motivated, engaged and informed banking and business community. Before we wrap up this session, I find it imperative to set the record straight and correct the false claims being made regarding HB 1193, “An Act to Amend Provisions of the Uniform Commercial Code (UCC).”

To understand what the bill aims to do, it is important to understand the UCC and its purpose. The UCC is the product of law commissioners from each state who serve together on the Uniform Law Commission (ULC) to develop uniform, model acts, or state laws, for adoption by state legislatures. It is not federal law, nor is it developed by the federal government. Let me be clear, these 2022 amendments to the UCC are drafted by the ULC for adoption in states across the nation, and by doing so, it keeps Congress from imposing federal laws into areas where states should be sovereign.

The UCC serves as the backbone of United States’ commerce, giving all Americans the legal infrastructure necessary to have confidence when conducting business in South Dakota and across state lines. The UCC provides commercial law for broad categories of transactions: the sale or lease of goods, negotiable instruments, bank deposits and collections, funds transfers, letters of credit, documents of title, investment property, and secured transactions in personal property. The UCC has been in place in South Dakota (SD) since the 1960s, and adoption of the UCC by every state has allowed the development of strong interstate markets.

The UCC has been revised in SD and by other state legislatures over the years at the recommendation of the Uniform Law Commission and American Law Institute to reflect the economy’s shift from a largely goods-based economy toward an economy that includes services, software, and information-based transactions. The latest updates, the 2022 amendments, will accommodate and “identify” emerged and emerging technologies such as distributed ledger technology (known as “blockchain”), and artificial intelligence. The amendments were drafted over a multi-year process with many open sessions. These amendments bring the UCC into the digital age by adding a new Article addressing digital assets and providing commercial law rules for the transfer and leveraging of virtual currencies and certain other digital assets. Adoption of the 2022 UCC amendments by all states will bring uniformity and clarity to the current law and allow certainty when transacting business with digital assets across state lines. Nothing in the UCC 2022 amendments prevents anyone from deciding what means of exchange to use or what transactions to enter.

Before joining the SDBA in October 2020, I spent more than two decades as a community banker in South Dakota. I took pride in serving customers and our communities—and still do today in my role as president of the South Dakota Bankers Association. My SDBA customer base and community focus now includes all South Dakota banks and communities. Serving the banking industry and advocating for common sense pro-business measures to enhance commerce in South Dakota is very rewarding and necessary. HB 1193: “An Act to Amend Provisions of the Uniform Commercial Code (UCC),” has been supported on record by many pro-business organizations in South Dakota, including the South Dakota Bankers Association, the Independent Community Bankers of South Dakota, South Dakota Retailers, South Dakota Chamber of Commerce and the South Dakota Trust Association, just to name a few.

For decades, South Dakota has long been touted as one of the nation’s friendliest states to conduct business. South Dakotans have proudly been open for business and we’ve humbly boasted economic freedom—freedom to grow, build and live in a state that doesn’t support government overreach. In South Dakota, we’re leading the nation in job growth, inbound relocation, tax revenue, GDP and more. We have cut red tape and removed and redacted outdated and unnecessary language from our laws and constitution. We respect businesses’ rights and adhere to an “open, fair market” philosophy. Yes, in South Dakota: We Mean Business.

Here are the facts: The opposition to HB 1193 is claiming that the updated UCC is, “…the greatest threat to our personal liberty and privacy we’ve faced in a generation.” This belief is simply untrue and misguided. The UCC establishes interstate commerce, allowing the playing field of the market to remain fair, level, and as South Dakotans can attest, open. Failure to adopt the 2022 amendments jeopardizes South Dakota’s ability to remain competitive in commerce and fair market trade, negating everything we’ve stood for in South Dakota for decades. You can “bank on” the facts, not the political theatre.

—Respectfully submitted by Karl Adam, president, South Dakota Bankers Association