Lawyers can accept payment in bitcoin, Nebraska ethics opinion says
Lawyers may accept payment in digital currencies such as bitcoin but must immediately convert the money into U.S. dollars, according to a Nebraska ethics advisory opinion.
The opinion, issued Sept. 11, is the first by a state ethics body to address the ethics of bitcoin payments, the Norfolk Daily News and Coin Desk report. Nebraska lawyer Matt McKeever says he requested the opinion.
Eastern Nebraska is a rapidly growing hub for payment processing and financial technology, McKeever told the Norfolk Daily News. Bitcoin ATMs are already in use in the area, and the currency is being used on a daily basis, he said. (Bitcoin ATMs accept dollars and convert the money to a digital wallet, the New Yorker explains.)
The ethics opinion by the Lawyer’s Advisory Committee says 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, the ethics opinion says.
Lawyers who receive payment in digital currencies should take three steps, the opinion says. 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.”
Lawyers may 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, the ethics opinion says. 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.
Bitcoin can’t be deposited into a client trust account unless converted to U.S. dollars, the opinion says. 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 the deposit into the trust account.
Hat tip to Bloomberg Big Law Business.