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If you’re a lawyer or someone who works in the law field, you know how important it is to stay abreast of changes that may affect how you do business and interact with clients. Some of them relate to ethical behavior. One increasingly common moral question on the minds of many legal professionals is whether to accept cryptocurrency payments from clients.
Nebraska Ethics Board Becomes First to Issue Official Opinion
Legal professionals who want clear-cut guidance about accepting cryptocurrencies will find that there’s not much to go on yet. An ethics board in Nebraska was the first to provide it in September 2017. Among the specifications of the ruling was that recipients must immediately convert the cryptocurrencies to U.S. dollars.
When diving into the potential ethical dilemmas of offering cryptocurrency as an accepted form of payment, other states—including North Carolina—bring up the Nebraska conclusion.
One of the potential issues is if lawyers accept cryptocurrencies as “advance payments” rather than as payment for fees already earned. In that case, lawyers could get in a bind, mainly if the value of the cryptocurrency changes and the client discharges the lawyer before completion of the work billed.
For example, if a client pays a retainer fee, that amount normally goes into a trust and remains the client’s property until the lawyer earns it. But, legal professionals have weighed in, and they believe that cryptocurrency does not fit the trust fund model. Additionally, the IRS views cryptocurrencies as property, not currency. That distinction could bring about other complexities, especially regarding the uncertain and varying value of cryptocurrencies.
Nebraska is so far the only state to give an official ruling on lawyers accepting cryptocurrencies for payment. However, other states have highlighted the possible risks. That means the legal industry at large may feel in the dark due to the lack of authoritative bodies making decisions on the matter. Then, they need to think especially carefully about the potential ethical ramifications before drawing conclusions.
Lawyers That Work with Tech Startups May Find it Necessary to Accept Crypto Payments
According to one report covered by TechCrunch, it’s increasingly common for lawyers with tech startup clients to accept cryptocurrencies. Some even find it essential, particularly if the companies work in the cryptocurrency space and accumulated most of their wealth in that format. But, cases exist where lawyers like some aspects of cryptocurrency but still decide they can’t accept it.
For example, cryptocurrencies and the associated transactions get registered on a distributed ledger called the blockchain. Transactions remain anonymous and secure while going through a network-wide validation process, and those are positive aspects. However, in cases of suspected money laundering, authorities can trace cryptocurrency activity to determine its origins.
Cryptocurrency has a history of being used in money laundering. Companies now offer tools that make it easier to get information about these digital funds to reduce that risk. However, that negative association may make some law firms hesitate to accept cryptocurrency—even if they work with clients from cryptocurrency companies.
If lawyers decide they’ll take cryptocurrency from clients, one ethical safeguard they could participate in is to take the time required to perform due diligence to verify the source of the funds by checking for signs of money laundering.
Bear in mind that as it stands, it is not illegal for legal professionals to accept cryptocurrency. However, they must weigh the ethical elements associated with how people could use cryptocurrency to participate in unlawful actions. As such, some members of the public may perceive lawyers as “bad” for accepting cryptocurrencies—especially if they view cryptocurrencies as “scams.”
Accepting Cryptocurrency Could Add a Client Convenience
Evidence shows a growing number of law firms accept cryptocurrency as a form of payment. More specifically, though, they all seem to focus on Bitcoin and only take that one. Bitcoin is the first and most well-known cryptocurrency, so perhaps the primary reason lawyers are accepting that one first is because of the market reach.
There may come a time—although likely not soon—where law firms are at a competitive disadvantage by not accepting cryptocurrencies. That will probably happen if people start spending cryptocurrencies as readily as they use credit cards now.
Some analysts wonder if the Nebraska decision mentioned earlier will pave the way for a larger financial trend. If so, lawyers could become early adopters and start accepting cryptocurrencies now. Taking that approach gives clients more options when deciding which payment methods to use.
A few years before Nebraska gave its decision, the first U.S. legal firm announced it accepted cryptocurrency. It’s one of the oldest American law firms, and a representative mentioned that the decision represented a desire to “be on the cutting edge of the law and technology.” If it’s important for law firms to show their clients that they’re innovative, accepting cryptocurrency could be a way to do it.
Lawyers Should Tread Carefully
In addition to the cryptocurrency acceptance happening by law firms in the U.S., the trend is branching out elsewhere, too. For example, firms in Finland and Ireland are among those that’ll take that payment method.
Lawyers interested in doing the same should remember that although doing so is not illegal, there are special things to keep in mind about how to handle crypto payments. Being aware of them should help legal professionals stay ethical.
