In Harper Lee’s To Kill a Mockingbird, attorney Atticus Finch accepted nuts from Mr. Cunningham as payment for legal services. If you can be paid in nuts for legal work, can you be paid in Bitcoins? One jurisdiction answered that question.
You’ve probably heard or seen “Bitcoin” in the news recently about it’s value being greater than $17,000, as well as being volatile and fluctuating in value by thousands of dollars. You may have also heard of blockchain technology, which is the technology that Bitcoin relies on.
What is Blockchain Technology?
Blockchain technology is simply a digital ledger that can’t be corrupted. It’s a global online database that is decentralized, public and distributed to thousands of nodes or computers. Since the digital ledger is public, any record or transaction that takes place is verified by the nodes to ensure a transaction is unique and authentic. The consensus by these thousands of nodes eliminates the issue of a hacker or a need for a third party to verify a transaction. If you want to learn more about blockchain technology and how it can affect the future, watch this video.
What is Bitcoin?
Bitcoin is a digital or virtual currency that was invented in 2009. Bitcoin is not controlled by a bank or government like other currencies, but instead relies on blockchain technology to verify its authenticity. You can use Bitcoin to buy goods and services. There are websites, like spendbitcoins.com that lists businesses that will accept Bitcoin.
Can I Get Paid in Bitcoin?
Nebraska is the first state to issue an ethics opinion on this question. Nebraska’s ethics opinion answers three questions about digital currencies: 1) May an attorney receive digital currencies such as Bitcoin as payment for legal services? 2)May an attorney receive digital currencies from third parties as payment for the benefit of a client’s account? 3) May an attorney hold digital currencies in trust or escrow for clients?
May an attorney receive digital currencies such as Bitcoin as payment for legal services?
The ethics opinion says yes – if you convert the digital currency into U.S. dollars immediately upon receipt. Converting the Bitcoin to U.S. currency will ensure compliance with the rules regarding fees. As I’ve stated above, Bitcoin value is volatile and can fluctuate wildly. The value of one Bitcoin on January 1, 2017 was $1,000, but rose to $17,000 on December 7, 2017. Waiting to convert the digital currency is not only risky, but you can see the opportunity of accepting an unreasonable fee.
May an attorney receive digital currencies from third parties as payment for the benefit of a client’s account?
One of the key advantages of using Bitcoin is its ability to be pseudo-anonymous. Sending and receiving Bitcoins doesn’t require you to provide from personal identifying information, but it’s not completely anonymous. As an attorney, you must ensure that whoever is paying you in Bitcoin doesn’t interfere with your independence or relationship with the client.
May an attorney hold digital currencies in trust or escrow for clients?
Similar to holding other property, an attorney may hold Bitcoins in trust or escrow for client. However, the ethics opinion suggests that you take additional steps to ensure its safekeeping. Since Bitcoin is a digital currency, it is susceptible to hackers and other security concerns. Thus, the attorney must take reasonable measures to ensure its safekeeping.
If you plan on receiving Bitcoin as a retainer to be drawn from when fees are earned, you must convert the Bitcoin to U.S. dollars and then deposit it into your trust account.
Technology, such as blockchain and Bitcoin, continues to alter the legal industry. Be agile and ready to meet the needs of your tech savvy clients.