Interesting piece this week in Attorney At Work about the issues involved when considering Cryptocurrency as a payment option for lawyers & lawfirms
QUESTION: Several years back we added credit card billing to our options for client bill payment, including through an online secured platform. Our bill collection rates dramatically increased along with how fast a bill was paid with emailed invoices. It was great!
We recently saw some companies accepting bitcoin and other cryptocurrencies as payment for goods and services. While we don’t expect a high volume of clients to pay with this new “currency,” we are thinking about offering it as an option. If nothing else, it shows we are keeping ahead of the curve on modern trends. Should we be pumping the brakes, or do we have the green light to accept cryptocurrency as payment?
ANSWER: At first glance, it may seem like you would be in the clear to accept alternative payments for the legal services rendered. Why not, since you can accept nonmonetary items such as a goat for preparing a family’s estate planning documents, so long as the goat was reasonable compensation for the legal services provided. Yes, I’m sure someone at some time bartered hooved animals for the services of an attorney and counselor at law. No?
Having clients is a good thing. Having paying clients is a great thing. We want to make it as easy as possible for our clients to pay our bills, i.e., do all we can to eliminate the time, method and ability barriers to accounts receivables.
According to the 2017 Legal Trends Report from Clio, lawyers spend only 2.3 hours (29 percent of an eight-hour workday) on billable tasks and, when factoring in realization and collection rates, firms only collect an average of 1.6 hours (20 percent of an eight-hour workday) of billable time per day. It’s no surprise we are trying various methods to reclaim value for our provided work product.
So, let’s break it down. What ethics rules might be considered in how you are paid for your work? What makes cryptocurrency different from currency (or bovine for that matter)?
At least one state bar has issued an advisory opinion on the topic of cryptocurrency as payment for legal services or otherwise being held for clients by a law firm. In Nebraska Ethics Advisory Opinion for Lawyers No. 17-03, the ethics committee concluded that attorneys “may receive and accept digital currencies such as bitcoin as payment for legal services” with some caveats.
The leading concern with the often volatile cryptocurrency values comes in ensuring the fees being paid by a client are reasonable, as required by ABA Model Rule 1.5. Bitcoin is one of the less volatile of these currencies, and still it has been known to have swings of 10 percent or greater occurring every few hours.
As the opinion gives the example, “An arrangement for payment in bitcoin for attorney services could mean that the client pays $200 an hour in one month and $500 an hour the next month, which the client could very easily allege as unconscionable.”
The opinion suggests the following actions to mitigate the risk of volatility and possible unethical overpayment for services:
- Notifying the client that the attorney will not retain the digital currency units but instead will convert them into U.S. dollars immediately upon receipt;
- Converting the digital currencies into U.S. dollars at objective market rates immediately upon receipt through the use of a payment processor; and
- Crediting the client’s account accordingly at the time of payment.
While this process of transparency and immediate conversion should help solidify the value paid and received, such clarity should accompany the transaction for any related fees. Like processing fees for credit card payments, cryptocurrencies may have various transactional fees tied to their acceptance and conversion. Firms must have a dedicated and reliable relationship with a digital currency exchange and payment processing services, enabling quick conversion of bitcoin payments into U.S. dollars. And, while the Nebraska opinion is silent on this issue, there should be transparency to the client on who pays for any related fees or costs.
Lastly, as this form of money (e.g., see SEC v. Shavers, Texas Eastern District Court No. 4:13-CV-416) or property continues to grow (with 2,340 types of cryptocurrency as of this writing), be mindful of federal and state statutes, rules and regulations concerning it. FinCEN and the Department of the Treasury regulate cryptocurrency exchangers and money transmitters, but national and global changes in its use will continue to evolve.
Some have already jumped in feet first. In addition to some small and midsize law firms across the globe accepting cryptocurrency, Law.com reports that Perkins Coie may have been the first BigLaw firm to accept bitcoin payments back in 2013, with Steptoe & Johnson following in 2016, and Frost Brown Todd in 2017.
Does the cost, complexity and risk outweigh the potential benefits of your firm accepting this novel and quickly evolving form of compensation? Like most things, it comes down to a business decision for you to make while ensuring you do so ethically under your Rules of Professional Conduct. Might we all be next someday?
About the Illinois Supreme Court Commission on Professionalism
The Commission on Professionalism was established by the Illinois Supreme Court in September 2005 to foster increased civility, professionalism and inclusiveness among lawyers and judges in the state of Illinois. By advancing the highest standards of conduct among lawyers, we work to better serve clients and society alike. These duties we uphold are defined under Supreme Court Rule 799(c). For more information, visit 2Civility.org, the Illinois Supreme Court Commission on Professionalism’s website.