Nicole Black, BridgeTower Media Newswires
Unless you’ve been living under a rock, you’ve no doubt heard a lot of buzz about bitcoin. This is because bitcoin is increasingly being accepted as a form of payment for all types of goods and services, including legal services.
However, as tends to be the case whenever lawyers delve into a new way of doing things, ethical issues can be triggered. That’s certainly the case when it comes to accepting bitcoin as payment for legal services.
Fortunately, one jurisdiction has weighed in on the issue thus far, and it concluded that it’s ethical for lawyers to accept bitcoin payments as long as certain conditions are met.
In October 2017, the Nebraska Ethics and Advisory Committee handed down Opinion 17-03 (online:https://supremecourt.nebraska.gov/sites/default/files/ethics-opinions/Lawyer/17-03.pdf). The committee opined that attorneys “may receive and accept digital currencies such as bitcoin as payment for legal services.” However, the committee acknowledged that Bitcoin cryptocurrency can be somewhat volatile, and thus explained that because lawyers are prohibited from charging unreasonable fees for legal services, they should take the following actions to mitigate the risk of volatility and possible unconscionable overpayment for services:
“1. Notify ... the client that the attorney will not retain the digital currency units but instead will convert them into U.S. dollars immediately upon receipt;
2. Convert ... the digital currencies into U.S. dollars at objective market rates immediately upon receipt through the use of a payment processor; and
3. Crediting the client’s account accordingly at the time of payment.”
However, notably, the committee explained that its determination was based on the fact that “bitcoins are property rather than actual currency, (and thus) bitcoins cannot be deposited into a client trust account ...”
One commentator (See:http://www.legalethicsinmotion.com/2019/04/floridas-third-dca-bitcoin-qualifies-as-currency/) has suggested that the Nebraska conclusion that bitcoins are property, not currency, was thrown into doubt earlier this year in The State of Florida v. Michell Espinoza (online:http://www.3dca.flcourts.org/Opinions/3D16-1860.pdf). In that case, Florida’s Third District Court of Appeals considered whether cryptocurrency constituted a “payment instrument” in the context of a money laundering prosecution. The court concluded that bitcoins are a “payment instrument, explaining that “there is no plausible interpretation of ‘monetary value’ or ‘payment instruments,’ as those terms are used in Chapter 560 that would place bitcoins outside of the statute’s ambit.”
The commentator suggested that because the Espinoza holding concludes that bitcoin is a “payment instrument” as opposed to “property,” the underlying conclusion reached by the Nebraska Ethics Committee — that lawyers can ethically accept bitcoins as payment for legal fees — may be called into question.
I’m not sure that’s the case. Whether bitcoins can be deposited into a trust account is of no moment. The committee’s determination was primarily focused on the solving the issue of the volatility of the value of bitcoin. To address that issue, the committee required that bitcoin be sold prior to depositing the payment into the attorney’s trust account. Bitcoin volatility remains regardless of whether it is defined as “property” or a “payment instrument.” As such, no matter which definition applies, bitcoins received as a retainer payment will nevertheless need to be converted to cash prior to its deposit into a trust account.
For that reason I would suggest that the committee’s determination that lawyers may accept cryptocurrency as payment for legal services still stands. But so too does the requirement that lawyers convert it into U.S. dollars prior to depositing the funds into trust.
Bitcoin isn’t going away, and the likelihood that legal clients will want to use it to pay for legal fees is only going to increase. For that reason I’m hopeful a few other jurisdictions will weigh in on this ethical issue in the near future. In the meantime, the Nebraska opinion continues to provide useful guidance for lawyers seeking to accept bitcoin as payment for legal services.
—————
Nicole Black is a director at MyCase.com, a cloud-based law practice management platform. She is also of counsel to Fiandach & Fiandach in Rochester and is a GigaOM Pro analyst. She is the author of the ABA book “Cloud Computing for Lawyers,” coauthors the ABA book “Social Media for Lawyers: the Next Frontier,” and co-authors “Criminal Law in New York,” a West-Thomson treatise. She speaks regularly at conferences regarding the intersection of law and technology. She publishes three legal blogs and can be reached at niki@mycase.com.
