Because it is so new and Congress only first explored the new cryptocurrency in mid-November, many attorneys are asking questions about this new decentralized digital currency:
"How can Bitcoin be placed into a trust account if I take a retainer?"
"Will the US government recognize it as a method of payment or ban it like China?"
"How do I accept Bitcoin without risking the websites that currently trade in it to be seized by the Government, if that happens?"
Well, I hope I can shed some light on this new and confusing topic.
In early December 2013 came another development. China decided to ban financial companies from accepting Bitcoin transactions, and its ban on China’s biggest Bitcoin exchange forced the Exchange to stop accepting deposits in the Chinese currency.
However, all is not lost. Some speculate (and I tend to agree) that this dent is temporary as more people continue join in and put their trust in the new technology. The two most attractive features about Bitcoin are that 1) the transaction is irreversible once the Bitcoin is sent (unless the other party actively chooses to send it back) so that avoids chargebacks; and 2) sending Bitcoin is extremely cheap as compared to other services, like Paypal. So, I think it will continue to grow, even if some countries won't recognize it.
Furthermore, it appears that the US government does not perceive Bitcoin as a a threat, but laden with benefits. “We all recognize that virtual currencies, in and of themselves, are not illegal,” Mythili Raman, acting assistant attorney general at the Justice Department’s criminal division, said at a hearing. The Committee on Homeland Security and Governmental Affairs, which solicited comments in an Aug. 12 letter, scheduled the hearing “to explore potential promises and risks related to virtual currency for the federal government and society at large.”
“The FBI’s approach to virtual currencies is guided by a recognition that online payment systems, both centralized and decentralized, offer legitimate financial services,” Peter Kadzik, principal deputy assistant attorney general, wrote in a letter dated Oct. 23, 2013. “Like any financial service, virtual currency systems of either type can be exploited by malicious actors, but centralized and decentralized online payment systems can vary significantly in the types and degrees of illicit financial risk they pose.”
Even the chairman of the Federal Reserve, Ben Bernanke, said that “[t]hese hearings means Bitcoin is finally coming into its own; it’s a real thing and it’s not going anywhere and these hearings highlight that.”
So Bitcoin may have a future after all.
However, the other concern is very law-firm-specific -- can lawyers accept a retainer in Bitcoin from a client?
Well, the simple answer is "no."
In many cases, lawyers can accept payment in any method they wish; stocks, cars, boats, even flowers (if you're crazy). Just make sure you don't accept payment in nude dances like this guy. However, in all of these cases, no ethical violation occurs if the payment is for services already rendered or it is an up-front flat-fee payment (Bar rules permitting.)
The issue gets a little hairy when the client pays the lawyer a retainer -- where the lawyer has not yet earned the fee paid, but will periodically deduct it from a trust account as hours are put in on the case. Lawyers must return the unearned retainer amount (if applicable) when the case is closed.
Thus, when a client pays a retainer in Bitcoin, the only way I can see out of committing an ethical violation is to convert the Bitcoin to its cash equivalent in USD immediately as the Bitcoins come through, and place them into a trust account in a Bank. This will eliminate the risk of Bitcoin's possible crashing or being seized by any government entity.
However, if the Bitcoin value were to rise, the client may have an argument that the lawyer owes the difference because the initial payment method was in Bitcoin -- that is if any retainer remains at the end of the lawyer-client relationship.
This we'll have to wait and see.
But if you're simply accepting a flat-fee and don't want to risk the currency's possible collapse, convert it to its current dollar value immediately on websites like coinbase or bitpay and send it to your bank. Use caution if you bank with JPMorgan Chase.
As of December, 2013, not many law firms accept Bitcoin. There is one in Kentucky, Texas, New York, and one that services clients nationwide. I am skeptical whether Forefront law was indeed the first law firm to accept Bitcoin, because Law4Business announced the same in April, but that is none of my concern -- let them battle it out.
However, I think that Bitcoin has a lot of potential and will continue to grow and that is why I accept it as a payment method for legal services.
If you require assistance with a DUI, traffic ticket, or some other criminal charge, please contact me or call me at (502) 931-6788.
Thank you for reading.
The DUI Guy.