Idaho Bill Defines Digital Assets Definition and Classification

On March 28, 2022, Brad Little, the Idaho governor, signed HB 583, which amends the definition and classification of “digital assets” under the Idaho Commercial Code.

Classification of Digital Assets

Under HB 583, “digital assets” are classified as “intangible personal property” and “general intangibles.” Notably, “digital assets” and “virtual currency” were distinguished because, while both are classified as “intangible personal property,” digital assets are considered securities qualifying as investment properties, which is not the case for virtual currencies.  

Sale of Digital Assets

Due to their classification as “personal property,” the HB 583 states that digital assets may be purchased in the same manner and in accordance with the same Idaho laws as other personal property in the state.

Perfection of a Digital Asset

A person who acquires an interest in and obtains possession or control of the digital asset will have a perfected interest—which grants the perfected party the right to priority with regard to the asset against all others, including creditors.

However, if a person acquires an interest in or takes control of a digital asset without being aware or receiving notice that there is an adverse claim for the priority rights to the assets, the unknowing acquiring person will take their interest in the asset “free of any adverse claim”—meaning, unencumbered by another’s previously existing claim.

Enforcement Date

This bill will become effective July 1, 2022. Although this bill only applies to residents of Idaho, with the recent increase in use of digital assets and demand for regulatory guidance of these assets, those participating or engaging in the digital asset market should continue to monitor their state’s regulatory efforts and maintain awareness of how these regulations could impact their organization.