CryptoCurrency: The New Legal Tender for Law Firms?

Credit Suisse's 2021 Global Health Report estimates the global wealth to be 418.3 trillion USD.

Money has always fascinated the human race; we often use it as a medium to buy or exchange. We tend to use the words money and currency interchangeably, but we should understand the basic definition first. According to Britannica, "Money is a commodity accepted by general consent as a medium of economic exchange." Merriam-Webster explains currency as "something (such as coins, treasury notes, and banknotes) that is in circulation as a medium of exchange." 

Before 770 B.C., the trade of goods and services was primarily through the barter system, and then coins were introduced. We moved from Stones, Gold, Bronze, Copper, Silver, other metals, paper, and plastic with generations. In the twenty-first century, money became virtual with the evolution of mobile transfer, and by 2009 we first came across Bitcoin (cryptocurrency). According to CoinMarketCap, the entire crypto market is worth more than 2 trillion USD, while Bitcoin holds the largest market share. As of May 2022, the total number of different cryptocurrencies is 10,308. 

Investopedia defines cryptocurrency as a digital or virtual currency secured by cryptography, making it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks based on blockchain technology—a distributed ledger enforced by a disparate network of computers. A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation. 

Cryptocurrency adoption 

Chainalysis's 2021 Geography of Cryptocurrency Report states that "[G]rowing transaction volume for centralized services and the explosive growth of Decentralized Finance (DeFi) are driving cryptocurrency usage in the developed world and in countries that already had substantial adoption, while peer-to-peer platforms are driving new adoption in emerging markets. Our biggest question for the next twelve months is how much adoption will continue to grow on those platform categories compared to new and emerging models we haven't seen yet." The report indicates that cryptocurrency adoption has been phenomenal in the last twelve months. 

The report also ranks the top 20 countries based on DeFi adoption, wherein the U.S. is at the top, followed by Vietnam, Thailand, China, the UK, India, and Netherlands, among others. Further, the report also provides a geographical breakdown (depicted in the table below) of global value received through cryptocurrency.  

Nick Abrahams, Global Co-leader – Digital Transformation with Norton Rose Fulbright, in his audible podcast "The Foil" stated, "What we have seen is the underlying architecture (blockchain) and that underlying architecture has proven over the last decade to be incredibly resistant to attacks. Whereas, most software solutions have vulnerabilities and are stuck by viruses or attacks." 

Nick believes that cryptocurrency will be part of the financial services sector in the next five years, but the trajectory to that point will not be without mishaps, there will be many issues along the way.

Acceptance in the legal industry 

Although the legal industry is risk-aversive, there are a handful of firms and individuals that tend to break the notion. In the table below, we have tried to shed light on a few forward-looking and progressive firms. Please note that the below data is a result of secondary research, apologies if we missed your firm or enterprise; please leave a note, and we will make sure to add your business to the list in our subsequent publication. 

Lawyer’s professional responsibility when accepting cryptocurrency 

Although the opinion differs by jurisdiction, in September 2018, Virginia State Bar published an article referencing the Nebraska opinion and talked about professional responsibility.  

According to the opinion, “When a client gives a lawyer bitcoins, it is “property,” not an actual currency, but Rule 1.15 requires a lawyer to safeguard client property. This means making sure your digital “wallet” is secure and backed up. If the lawyer wants to keep the bitcoins and give the client the equivalent value in cash, those funds must go into the trust account if the bitcoins were payment of an advanced fee.” 

The opinion suggests that a lawyer should convert bitcoins to the latest dollar value and pass the differential (if any) to the client. 

The bottom line 

The history of currency is still in progress, and it will continue to evolve as technologists and regulators join hands to develop a medium of communication or exchange. 

Elon Musk's recent pronouncement that Tesla will no longer accept Bitcoin, raised concerns in the mind of crypto investors and consumers. 

While more and more law firms welcome payment via crypto, the number of clients paying fees via crypto is limited or minimum. Are consumers of legal services treating payment through cryptocurrency as a routine transaction or settling off assets for legal advice?

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