2018 has seen a bevy of law firms begin accepting cryptocurrency as payment for legal services, joining early adopters of the likes of Perkins Coie, who have been accepting bitcoin since 2013. This is an international phenomenon – Steptoe & Johnson in the US, Selachii in the UK and Piper Alderman in Australia have all announced they are taking bitcoin payments. This begs the question: why?
Faith in Blockchain
Accepting crypto shows law firms are vested in blockchain technology. Conveying this message will only become more important as the number of blockchain-based firms and bitcoin-owning individuals continue to grow, all of whom are potential clients. For a conventionally risk-averse sector to be ‘blockchain-ready’ bodes well for the future of cryptocurrencies not just as a store of value, but as a means of payment too.
A Growing Sector
Accepting bitcoin is not merely an expression of confidence, though. Increasingly, it is a necessity. The blockchain sector is only getting larger as more use cases for distributed ledger technologies are discovered and implemented. In December 2017, ICOs collectively raised over 1 billion US dollars for the first time. At least for the time being, blockchain companies earn in bitcoin and pay in bitcoin, though this may yet transition into another cryptocurrency, as many have called for. This matters for the firms (including law firms) who hope to service this new sector. If these firms want to ride the blockchain wave, they need to get on board with the currency of choice: bitcoin.
However, accepting bitcoin comes with risks. Bitcoin continues to exhibit extreme volatility, most recently crashing from an all-time high in December 2017 of around $19,500, bottoming out at around $5,950 on February 6 2018. Retail and institutional investors will bear the brunt of such crashes in the future. Moreover, in some jurisdictions, there are also additional legal issues to be aware of. For instance, in many states in the US, there are rules that prohibit charging clients unconscionable fees. With bitcoin’s characteristics rallies and price surges, legal fees may very easily double in real USD terms over a settlement period, which may put law firms at risk. Another such conundrum is avoiding accepting criminal proceeds as payment. This is problematic since bitcoin is anonymous and tracking the origin of packets of money can be difficult or impossible. Another consideration is that law firms looking to make the move must engage additional technical support teams as well as exchange partners for processing payments.
Cashing Out Quick
One solution to many of these issues is to immediately cash out bitcoin-denominated payments upon receipt. This avoids the prospect of downside volatility as well as potential issues with the charging of unconscionable fees. Indeed, this was the course of action recommended by the Lawyers Advisory Committee in Nebraska, one state with unconscionable fee charging rules, in September 2017.
If recent moves by law firms around the world, corporate and boutique alike, are anything to go by, accepting crypto is a smart move. It proves to clients that the firm has confidence in distributed ledger technology and, in many cases, is the only currency clients are willing to pay with. Of course, it comes with price risks and additional overheads, these can be largely mitigated through quickly withdrawing crypto into fiat currency. The prevailing sentiment remains: accepting crypto looks to become more and more the status quo.