More large law firms are accepting bitcoin payments for their legal services, signaling the digital currency’s firmer foothold in corporate America. In the years ahead, cryptocurrencies such as Bitcoin and blockchain technology will have an impact on just about every private and public institution in the nation. Understanding and accepting cryptocurrency as a form of payment puts firms in a better position to help a wide variety of clients in many industries. However, there are important caveats to remember when paying legal fees with Bitcoin. When used to pay for attorney fees, anonymous currencies must also take into account the ethical obligations imposed by the state bar association.
Attorney bitcoin payments should be reasonable, identifiable, and safe
A recent Nebraska Ethics Board gave the green light to attorneys accepting bitcoin, but warned against other ethical issues that this type of payment could bring up. With similar cautions, the board also approved Bitcoin payment of legal fees by third-parties, and holding bitcoins in escrow on behalf of a legal client. In describing the ethical obligations associated with these payment arrangements for legal services, the board emphasized the following:
- Fees must be reasonable – Ethical rules prohibit an attorney from accepting an unconscionable over-payment for services. The ethics board said that, due to the volatility in the market, attorneys should convert currencies into U.S. dollars immediately after payment.
- Third party payers must identify – Where a third party wishes to pay for a client’s legal fees, the attorney must be able to identify the payer, and ensure that the third-party payment doesn’t interfere with the attorney’s independent relationship with the client.
- Bitcoins in escrow must be separate – As long as holdings are kept separate from a firm or attorney’s own property, an attorney may hold cryptocurrency in escrow on behalf of a client. However, the board in Nebraska also required the attorney to maintain records for at least five years.
Extra security measures may be required
In addition to these standards, the ethics board called for the use of multi-signature wallets in order to keep escrow funds more secure. The court also stated:
Other reasonable measures may include maintenance of the wallet in a computer or other storage device that is disconnected from the Internet (also known as “cold storage”), a method that would also allow for off-line storage of one or more private keys.
If you are unsure about the technology at this point, it may be best to find someone who can help you avoid legal pitfalls of adopting this secure technology while taking advantage of the benefits.