The ABA Journal reported that, on September 11th, Nebraska issued an ethics advisory opinion allowing lawyers to accept payment in cryptocurrencies such as bitcoin. This appears to be the first such state bar ethics opinion.
The ethics opinion by the Lawyer's Advisory Committee states that a growing number of law firms in other jurisdictions accept payments in bitcoin, a currency with volatile prices. In 2013, for example, the price fluctuated from about $7 per bitcoin to $1,200 per bitcoin. Immediate conversion to dollars mitigates the risk of volatility and possible unconscionable overpayment for legal services according to the opinion.
Here are the three steps recommended by the opinion when a payment for legal fees is made in digital currency.
First, the lawyer should notify the client that the payment will be immediately converted to U.S. dollars. Second, the lawyer should make the conversion through a payment processor. Third, the lawyer should credit the client's account at the time of payment.
The opinion also says that lawyers who accept virtual currency "must be careful to see that this property they accept as payment is not contraband, does not reveal client secrets, and is not used in a money-laundering or tax avoidance scheme; because convertible virtual currencies can be associated with such mischief."
The opinion allows lawyers to hold digital currencies in trust for clients after advising that the currency won't be converted to U.S. dollars, but the currency must be held separate from the lawyer's property and must be properly safeguarded. There is no bank or FDIC insurance to reimburse a client for hacked bitcoin, so lawyers should take precautions such as encryption or use of more than one private key for access. Interesting that cybersecurity was one focus of the opinion.
Bitcoin may not be deposited into a client trust account unless converted to U.S. dollars. If the bitcoin payment is intended to serve as a retainer that will be drawn on for future fees, the lawyer must immediately convert it to U.S. dollars before depositing it into the trust account.
As soon as I learned of this opinion, I contacted Virginia State Bar Counsel Jim McCauley to request that Virginia consider issuing similar ethical guidance for lawyers wishing to accept cryptocurrencies. When John and I lecture, we are frequently asked about the ethics of accepting such payments – hopefully, we will have guidance on that issue soon!
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Digital Forensics/Information Security/Information Technology