Ride the Lightning

Washington DC Bar Allows Lawyers to Accept Cryptocurrency as Payment

July 6, 2020

On June 30, Bloomberg Law reported that the District of Columbia Bar Legal Ethics Committee has issued an ethics opinion (Op. 328) saying that its lawyers can accept cryptocurrency as payment for legal services as long as the fee agreement is fair and reasonable and the lawyer can safeguard the virtual property.

Attorneys "cannot hold back the tides of change even if they would like to, and cryptocurrency is increasingly accepted as a payment method by vendors and service providers, including lawyers," according to the opinion.

Recognizing the volatile nature of cybercurrency, the opinion says that the fairness to the client of such fee arrangements should be judged at the time they're made.

The opinion noted that the IRS treats cryptocurrency as property rather than currency for tax purposes, and it agreed that "payment of fees in cryptocurrency is more akin to payment in property than payment in fiat currency."

Law firms, including large firms, are accepting cryptocurrency as payment for services more and more, despite the risk and volatility associated with cryptocurrency. The North Carolina, Nebraska, and New York City bars have issued advisory opinions allowing accepting virtual currency as payment.

Ethics rules require lawyers' fees to be reasonable, the opinion said, but they don't preclude accepting "potentially volatile assets" as payment. Examples of such payment include shares of corporate stock, property, and cryptocurrency.

Lawyers who accept an advance retainer in cryptocurrency must abide by ethics rule 1.8(a), which requires a reasonable agreement with terms that have been explained in writing and are fair to the client.

Terms may include:

• A clear explanation of how the client will be billed;
• Whether market increases and decreases in the value of the cryptocurrency triggers obligations by either party;
• And whether the lawyer or the client will be responsible for cryptocurrency transfer fees.

The client also must have the opportunity to confer with outside counsel on the arrangement and attorneys need to have written, informed consent to the agreement from clients. The rule doesn't apply to payment for fees already earned, according to the opinion.

Lawyers who accept payment in cryptocurrency for future work must be competent in the technology to protect the client's virtual property as the lawyer would protect all advance fees, which in this case "requires lawyers to understand and safeguard against the many ways cryptocurrency can be stolen or lost," the opinion said.

That last part has me shaking my head – no reasonable measure of protection is up to absolutely protecting cryptocurrency. And lawyers are very unlikely to understand all the methods used to raid cryptocurrency wallets. Without a doubt, we'll see a lawsuit involving the theft of cryptocurrency used to pay legal fees.

Sharon D. Nelson, Esq., President, Sensei Enterprises, Inc.
3975 University Drive, Suite 225|Fairfax, VA 22030
Email: Phone: 703-359-0700
Digital Forensics/Cybersecurity/Information Technology
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