Hello everyone and welcome to this Ethics Alert which will discuss the recent Nebraska Ethics Opinion which found that lawyers may accept fees and payments in a digital virtual currency such as Bitcoin. The ethics opinion is Nebraska Ethics Advisory Opinion for Lawyers 17-03 (September 11, 2017) and is here: https://supremecourt.nebraska.gov/sites/default/files/ethics-opinions/Lawyer/17-03.pdf
This ethics opinion is the first to address this topic and notes a growing number of law firms in other jurisdictions accept payments in Bitcoin, a virtual digital currency with volatile prices. As an example of the volatility, in 2013, the price of a single Bitcoin fluctuated from about $7.00 to $1,200.00.
The opinion states that lawyers who accept payment in digital currency should notify the client that the payment will be immediately converted to U.S. dollars, make the conversion through a payment processor, and credit the client’s account at the time of payment. The opinion states that immediate conversion to dollars reduces the risk of volatility and potential excessive fees for legal services (or a reduction of the amount of payment because of a reduction on the value of the Bitcoin).
The opinion also states that lawyers who accept virtual currency must be careful to make sure that the “property” that 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.”
According to the opinion, Bitcoin cannot be deposited into a client trust account unless it is converted to U.S. dollars and, if the Bitcoin payment is intended to be used to pay future fees, the lawyer must immediately convert it to U.S. dollars before the funds are deposited into the trust account.
If the lawyer wishes to hold the Bitcoin funds in trust without immediate conversion to U.S. dollars, the lawyer must advise the client that the currency will not be converted to U.S. dollars, the currency must be held separate from the lawyer’s property, and the currency must be properly safeguarded. The opinion notes that there is no bank or FDIC insurance to reimburse a client for hacked Bitcoin and lawyers should take the proper precautions such as encryption or the use of more than one private key for access.
Bottom line: This opinion is the first to address ethics issues when lawyers accept surrounding digital/virtual currencies as payment for fees. For an excellent analysis of the Nebraska opinion and the potential pitfalls of lawyers’ acceptance of digital currency, especially to hold in trust, you should read Florida lawyer Christopher Hopkins’ recent blog titled “A Lot of Lawyers Claim That They Accept Bitcoin…But Are They Doing It Wrong?”, which is here: https://internetlawcommentary.com/2017/09/21/nebraska-ethics-opinion-for-lawyers-about-bitcoin-virtual-currency-payments-and-escrow/
Be careful out there in this digital age…
As always, if you have any questions about this Ethics Alert or need assistance, analysis, and guidance regarding ethics, risk management, or other issues, please do not hesitate to contact me.
Disclaimer: this e-mail is not an advertisement, does not contain any legal advice, and does not create an attorney/client relationship and the comments herein should not be relied upon by anyone who reads it.
Joseph A. Corsmeier, Esquire
Law Office of Joseph A. Corsmeier, P.A.
29605 U.S. Highway 19 N. Suite 150
Clearwater, Florida 33761
Office (727) 799-1688
Fax (727) 799-1670