Cryptocurrency: New Rules, New Money, New Issues

• Jurisdiction: California,United States
• Author: By David M. Majchrzak
• Publication year: 2019
• Citation: Vol. 25 No. 2

CryptoCurrency: New Rules, New Money, New Issues

By David M. Majchrzak

David M. Majchrzak is a seasoned ethicist, law firm risk management consultant, civil litigator, and certified specialist in legal malpractice law by the State Bar of California. He is a shareholder of Klinedinst PC. He currently serves as the immediate past chair of the San Diego County Bar Association's invitation-only Legal Ethics Committee, a director and secretary for both the San Diego County Bar Association and the Association of Discipline Defense Counsel, and a director for the Thomas Jefferson School of Law Alumni Association. He also serves as the chair of the Integration and Engagement Committee and a member of the Future of Lawyering Committee of the Association of Professional Responsibility Lawyers. He recently completed service as a three-year member of the State Bar's Committee on Professional Responsibility and Conduct, and chair of its outreach committee.

In a traditional transaction, California lawyers receive U.S. dollars in exchange for providing legal services. But it is not unheard of to see transactions where lawyers are compensated in different ways. Most typically, alternate payments come through the provision of goods. There are, of course, other options. The most recent of these alternate payment trends is toward the use of cryptocurrency.

California does not yet have any opinions—whether through case law or from its several ethics organizations—on this subject. Therefore, this piece addresses what the author believes would be a common sense approach to addressing a situation that is perhaps ahead of even the recently revised Rules of Professional Conduct.

GENERAL BACKGROUND

John Oliver has quipped, "Cryptocurrency is everything you don't know about money combined with everything you don't know about computers." Yet, crytpocurrency is not new, having been around since at least since 2009, when Bitcoin first released its open-source software. Since then, over 4,000 alternative cryptocurrencies have emerged. These digital currencies are transferred using blockchain technology, which means that each unit has a provenance encoded so that the names of each registered owner may be traced back to when the coin was initially mined or otherwise offered. Despite the increasing availability of cryptocurrency, it is still not in mainstream usage and, at the very least, presents unique challenges to handle properly, especially in the legal profession, where ethical rules govern lawyers' conduct.

NEBRASKA'S FIRST TAKE

Less than 18 months ago, Nebraska issued Ethics Advisory Opinion for Lawyers No. 17-03, the first published analysis of the circumstances, if any, under which lawyers may receive digital currencies as payment for legal services. While concluding it was permissible to receive cryptocurrency, Nebraska's Lawyers Advisory Committee concluded that there were some significant restrictions.

For example, it concluded that, to ensure that the fee charged remains reasonable, lawyers should mitigate the risk of volatility and possible unconscionable overpayment for services by (1) notifying the client that they will not retain the digital currency units, but instead will convert them into U.S. dollars immediately upon receipt; (2) converting the digital currencies into U.S. dollars at objective market rates...