ETHICS WATCH Accepting Bitcoin?, 0914 SCBJ, SC Lawyer, September 2014, #10
| Author | Nathan M. Crystal, J. |
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\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0An increasing number of lawyers are accepting client fees in the form of bitcoin. See www.law360.com/ articles/498830. Law firms in the UK, Italy, Germany, and Spain have declared their acceptance of bitcoin as a method of payment, and the Israel Bar Association has advised that acceptance of bitcoin is ethically permissible. But what is bit-coin, and is acceptance of bitcoin as payment for fees ethically permissible and desirable?
\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0What is bitcoin?
\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0For detailed information see https://en.bitcoin.it/wiki/FAQ. Bitcoin (symbol BTC) has been characterized in many ways: digital currency, digital cash, virtual currency, electronic money, cryptocurrency or a payment system. The key aspect of bitcoin is that it works peer-to-peer (P2P), i.e. when you subscribe to the bitcoin system by opening a "bitcoin wallet" you can make direct payments to another subscriber either domestically or internationally without using the intermediary of a financial institution and without the backing of a central government, as is the case with "fiat money." This is not to say that bitcoin or other virtual currencies replace fiat currencies, such as the U.S. dollar. More about the conversion process later in this article.
\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0Why should lawyers consider accepting bitcoin?
\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0The major reason for use of bit-coin is reduction in transaction costs and speed. Transactions involving wire transfers or credit card payments have substantial fees. For example, credit card issuers charge merchants "swipe" or "interchange" fees, typically between 3-3.5%. Credit card payments also may be subject to charge back if the payor later objects to the transaction. U.S. banks charge $35-$45 for international wire transfers, such transfers can be revoked, and delays of several days may occur. By contrast, bitcoin transactions have either no fee or very small fees (at least for the immediate future), are irrevocable, and are typically processed within minutes, the average time being 10 minutes. Two other reasons can be given for using bitcoin: reputational and privacy. Technological savviness and use are reputational factors that may be attractive to certain types of clients. Early acceptors of bit-coin may gain a "first adopter" reputational advantage over other lawyers. Privacy is another factor. Payment in bitcoin is like payment in cash. Clients who wish to maintain privacy may find this form of payment more desirable than traditional non-cash forms of payment that can be more readily traced. Of course, as discussed below, just as cash payments pose...
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