August 21, 2018

Cash or Bitcoin? Ethics Board Approves Technology as Fund Source

<a href="mailto:josephine.bahn@gmail.com" target="_blank">Josephine M. Bahn</a> – April 10, 2018

Litigators now have an additional option to offer clients paying for their legal services. Bitcoin, a digital currency sometimes referred to as "cryptocurrency," transfers value—or "bitcoins"—anywhere in the world. The Nebraska Ethics Advisory Board has approved the use of law firms accepting Bitcoin due to the uptick in use of digital currencies in other jurisdictions, albeit with strict requirements on when and how the currencies can be accepted. Lawyers should consider the strict requirements that come with accepting digital currencies when considering using them in their practice, caution leaders of the ABA Section of Litigation.

The Opinion
The Nebraska board approved Bitcoin as a form of payment for services, subject to certain limitations. The opinion explains that the ease of payment and other benefits to the payor come with certain requirements for attorneys accepting Bitcoin. The board was mindful that a change in the price of Bitcoin could lead to attorneys being underpaid or clients being overcharged. To avoid these problems, the opinion establishes several requirements for using Bitcoin.

First, a lawyer accepting Bitcoin must notify clients that the Bitcoin will immediately be converted to U.S. dollars. Second, the conversion must go through a payment processor. Third, the lawyer must credit the client's account at the time of payment. Lawyers may hold Bitcoin in trust for clients only after advising that the Bitcoin will remain as Bitcoin and not be converted but that it will be held separately from the lawyer's property.
The opinion specifically places itself within a trend that it notes has started with more jurisdictions using Bitcoin, albeit with restrictions. Because the Model Rules of Professional Conduct require lawyers to stay on top of technological trends and advancements, understanding the opinion is paramount for lawyers who want to allow clients to use another form of payment while simultaneously heeding the stringent guidelines the opinion requires.

Lawyers Accommodate Client Requests, But Should Use Caution
While accepting traditional forms of payment, law firms across the country have seen an increase in requests from clients interested in paying in digital currencies. "Law firms and lawyers are like any business [that] want to be paid for your services, and maybe you have customers wanting to pay you in cryptocurrencies," opines Christopher A. Wiech, Atlanta, GA, past Young Lawyers Subcommittee chair of the Section of Litigation's Intellectual Property Committee. Lawyers are moving to accepting cryptocurrencies in order to keep up with their clients payment preferences.

Lawyers in states allowing cryptocurrency use should be careful not to treat new technologies the same as cash or credit, Section leaders warn. "While thirty years ago many lawyers refused to even consider accepting credit cards for payments, most attorneys and law firms do not hesitate to accept credit card payments today for legal services. Bitcoin appears to be on the same track and has been accepted as a common form of payment for other businesses such as payments between technology companies. But, as with most new technologies or developments, the increased use and acceptance also probably will result in increased regulation," says Kenneth M. Klemm, cochair of the Section's Pretrial Practice and Discovery Committee.

Lawyers should "consider how and where their business will use cryptocurrencies, determine what laws and regulations might apply, assist clients in implementing their plan so that they comply with applicable law, and advise them to stick to their plan," suggests Wiech, adding that "it's incumbent on counsel to stay informed on new laws or changes to existing laws, to advise your client if plans need to change."

Not All Cryptocurrencies or Clients are Alike
Bitcoin is the most mainstream cryptocurrency in use today. Lawyers must "impose acute and critical vigilant measures to avoid any unnecessary issues that could impair a client relationship, cause financial loss, or place the firm into harm's way" when considering other developing technologies, warns Zachary G. Newman, cochair of the Section's Corporate Council Committee. While "regulators are coming off the sidelines and are going to start calling the game," Wiech adds, when it comes to cryptocurrency, lawyers must be cautious and compliant with the ethics rules of their state when accepting new forms of currency.

As each case presents different facts, so too do clients. "If your clients are going to be in a business that touches Bitcoin or other cryptocurrencies, it's incumbent on the lawyer to know what they're doing, where they're doing it, and what laws apply," warns Wiech. Suggesting that Bitcoin is the credit card payment option of thirty years ago, Klemm adds that "as with most new technologies or developments, the increased use and acceptance also probably will result in increased regulation." Clients' interests remain paramount when determining whether to accept non-traditional forms of currency in handling their cases.

 

Josephine M. Bahn is a contributing editor for Litigation News.


Hashtags: #Bitcoin #EthicsOpinion #NowAcceptingBitcoin

Resources:

<a href="mailto:josephine.bahn@gmail.com" target="_blank">Josephine M. Bahn</a> – April 10, 2018