Virginia Lawyers Weekly VA Lawyers Weekly
As the world becomes more digitized, the ways people pay for goods and services rendered are becoming more digitized as well. The legal field is no exception.
A recent proposed ethics opinion from the Florida Bar Ethics Department tackled some of the issues surrounding digital payment processing services like Venmo or PayPal. In the March 23 opinion, the Professional Ethics Committee found that the use of digital payment processing services is an ethical way for lawyers to accept payment.
“The Committee sees no ethical prohibition per se to using these services, as long as the lawyer fulfills certain requirements,” the opinion states. Those requirements include taking precautions to prevent unwanted disclosure of information and ensuring that any transaction fees are paid by the lawyer and not from client trust funds.
While the opinion offers answers to some questions in the digital realm, other state bars across the country have remained largely silent on issuing official ethics guidance on whether lawyers can accept payment via cryptocurrency like Bitcoin, leaving lawyers unsure of the ethical implications of offering that option to prospective clients.
Cryptocurrency as payment
A 2020 Forbes article defined cryptocurrency as “decentralized digital money, based on blockchain technology.” The medium is digital, encrypted and decentralized, meaning there is no authority that maintains the value of cryptocurrency, unlike the U.S. dollar. Coins are obtained via a process called “mining,” which involves the execution of complicated mathematical equations that require large amounts of computing power.
Although the first cryptocurrency, Bitcoin, was created in 2008, the use of cryptocurrency has skyrocketed in recent years. As a result, the value of Bitcoin has risen, drawing interest in cryptocurrencies. As of June 23, one “Bitcoin” is worth approximately $33,000.
While the usage of cryptocurrency is not widespread, the recent growth has led to more businesses considering the option of accepting cryptocurrency. Retail businesses such as Starbucks, Home Depot and Sheetz have begun accepting Bitcoin along with traditional methods of payment.
Cryptocurrency and the legal field
Thus far, the Virginia State Bar Standing Committee on Legal Ethics has not issued a formal opinion on accepting cryptocurrency in Virginia. Virginia State Bar Ethics Counsel Jim McCauley said in an email to Lawyers Weekly that the guidance he has given lawyers on this issue has followed advice from a 2017 Nebraska Bar Association opinion on the subject.
In the 2017 opinion, the Nebraska Bar Association decided that an attorney could accept digital currencies as payment for legal services, but they must convert the digital currency into U.S. dollars or another form of fiat currency immediately upon receipt at “objective market rates” through a payment processor. This condition is meant to protect the attorney from violating rules against unreasonable fees, as the value of digital currency can change dramatically over time.
Also at issue is compliance with rules governing business transactions with a client. Virginia’s rule governing prohibited transactions is Rule 1.8, which states that a lawyer shall not enter into a business transaction with a client unless the terms are fair and fully disclosed and transmitted in writing, the client is given the opportunity to seek advice of independent counsel and the client consents in writing. McCauley wrote that traditional forms of payment do not trigger this rule, but because of the “extraordinary” fee agreement when using virtual currency, more scrutiny is required by the lawyer accepting payment.
“The overarching principle is fairness to the client,” McCauley wrote.
Three other bars have issued opinions on cryptocurrency in recent years. The North Carolina State Bar ruled in 2019 that lawyers “may receive virtual currency as a flat fee for legal services, provided the fee is not clearly excessive.”
“The value of virtual currencies fluctuates significantly and unpredictably from day to day,” the North Carolina opinion states. “Without an express agreement between Lawyer and Client on when the valuation of the virtual currency is determined, Lawyer could receive an inappropriate windfall in the form of extreme overpayment for legal services.”
In addition to North Carolina, the New York City Bar and the D.C. Bar have agreed that it is ethical for attorneys to accept cryptocurrency, with caveats. All three bars are of the opinion that lawyers can accept cryptocurrency as a flat fee, while the New York City Bar allows for lawyers and clients to agree on units of cryptocurrency per hour for hourly billing.
For attorneys in Virginia who are considering accepting cryptocurrency, McCauley noted that LEO 1606 applies in these cases. Approved by the Supreme Court of Virginia in 2016, LEO 1606 affirms that an advance fee remains the property of the client until being earned. This means that in a virtual currency transaction, lawyers and clients must ensure the payment is fair and reasonable and must account for adjustments in value of the virtual currency over time.
“For example, if the virtual currency appreciates 100 fold between the time of payment and the time the lawyer has earned the fee, the lawyer may only claim the agreed reasonable value of the lawyer’s service, not a windfall created by the client’s investment,” McCauley wrote.
McCauley also wrote that attorneys accepting cryptocurrency must be sure to “exercise reasonable care” in safeguarding it, pursuant to Rule 1.15 of the Virginia Rules of Professional Conduct.
“Cryptocurrency storage is vulnerable to cybertheft and cyberattack. It can be lost or destroyed,” McCauley wrote.
Acceptance in Virginia
In 2015, Roanoke law firm Anderson, Desimone & Green announced it would begin accepting Bitcoin as a form of payment from clients. Firm president Christopher Desimone said he believes the firm was the first in the region to accept Bitcoin.
Six years later, Desimone said his firm has yet to see anyone take them up on the offer.
“We are an estate, trust and elder law firm, so although we had good intentions, none of our clients have paid us in Bitcoin,” Desimone said via email.
“Although Bitcoin is used primarily as an investment, it has yet to be utilized as a payment source on a day-to-day basis,” Desimone continued.
McCauley echoed the sentiment, saying that since 2018, he has had “only a handful” of inquiries on the ethical implications of cryptocurrency.
“We know that some lawyers and a few law firms are accepting cryptocurrency in Virginia,” McCauley said. “I suspect there will be an increasing demand from clients and lawyers – to use or accept virtual currency as payment for legal services.”
