Omaha, Nebraska, September 20, 2017 - The Omaha law firm of Copple, Rockey, McKeever & Schlecht is preparing to implement policies to accept payment by Bitcoin and similar digital currencies in light of a recent opinion of The Lawyer's Advisory Committee. The Lawyer’s Advisory Committee appointed by the Nebraska Supreme Court recently published an opinion stating that it is ethical for attorneys licensed in Nebraska to receive digital currencies such as Bitcoin as payment for legal services and to also hold them in trust for clients. The Advisory Committee published its Opinion 17-03 at the State of Nebraska Judicial Branch website on September 11, 2017.
Bitcoin is a software program that creates a shared, digital ledger book that has been used by many around the world as a payment system resembling a currency since year 2009. Bitcoin and similar programs have been called “digital currencies” or “virtual currencies”. Because they often use mathematical problems and encryption as part of their program, protocols such as Bitcoin are alternatively called “crypto-currencies”.
Although law firms across the country have announced that they accept bitcoins for payment, Opinion 17-03 is the first opinion from a state bar association on whether attorneys can do so in compliance with the Rules of Professional Conduct, the system of ethical rules that attorneys in many states must follow. Although Opinion 17-03 addresses only the conduct of attorneys licensed to practice law in the State of Nebraska, other states that also use similar Rules of Professional Conduct to govern their attorneys may see it as a guide for their own judicial systems or bar associations.
“Eastern Nebraska is rapidly growing into a hub for payment processing and ‘fintech’, the new field of financial technology,” said Matt McKeever, an attorney with the law firm of Copple, Rockey, McKeever & Schlecht with offices in Norfolk and Omaha, who requested the opinion from the Advisory Committee. “Bitcoin and other currencies like it are being used on a daily basis in Omaha and Lincoln, often being purchased from one of the Bitcoin ATMs in the area. A number of Nebraska software companies are also developing applications using the software foundation of Bitcoin, known as blockchain technology, to create other applications that don’t involve payments.”
The opinion from the Advisory Committee answers three questions that arise with the intersection of a law practice and digital currencies. First, the opinion states that an attorney may accept Bitcoin and other digital currencies for payment, but under certain circumstances. The Nebraska Code of Professional Conduct prohibits attorneys from charging unreasonable fees. The opinion required that attorneys mitigate the risk of Bitcoin’s volatility and possible unconscionable overpayment for services by (1) notifying the client that the attorney 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 immediately upon receipt through the use of a payment processor; and (3) crediting the client's account accordingly at the time of payment.
The second part of the opinion addresses the near-anonymous nature of Bitcoin and similar crypto-currencies. A Nebraska attorney may receive digital currencies as payment from third parties who are not clients so long as the payment does not interfere with the attorney's independent relationship and the payor is identified using know-your-client (“KYC”) procedures before receipt of payment.
Third, the opinion allows a Nebraska attorney to hold bitcoins and other digital currencies in escrow or trust for clients or third parties but with requirements. Because bitcoins are viewed by many U.S. government agencies, including the IRS, as property rather than actual currency, bitcoins cannot be deposited into the usual trust accounts maintained by attorneys. The lawyer must hold any units of such currencies separate from the lawyer's property, keep them with commercially reasonable safeguards and maintain records regarding the property for five (5) years after termination of the client relationship.
The law firm of Copple, Rockey, McKeever & Schlecht is taking the necessary steps, including implementation of policies to comply with the Opinion, to accept Bitcoin and similar digital currencies for payment. “Our firm has a number of clients who are in the field of software development, including programs for Bitcoin and other blockchain applications,” said McKeever, who has been advising clients in Nebraska and New York about the legal and regulatory aspects of Bitcoin since 2013. “Accepting Bitcoin will be our way of supporting the growing ‘Silicon Prairie’ in Nebraska.”
Opinion 17-03 may be found here: https://supremecourt.nebraska.gov/sites/default/files/ethics-opinions/Lawyer/17-03.pdf
Citations from the Nebraska Code of Professional Conduct.
1. Payment for legal services. Neb. Ct. R. Prof. Cond. § 3-501.5(a).
2. Payment from Third Parties. Neb. Ct. R. of Prof. Cond. §3-501.7(a), §3-501.6.
3. Trusts. Neb. Ct. R. of Prof. Cond. §3-501.15(a); Neb. Ct. R. §§ 3-901 to 3- 907.
About the Lawyer’s Advisory Committee:
The eight members of the Lawyers' Advisory Committee are attorneys appointed by the Nebraska Supreme Court. Each Supreme Court Judicial District is represented on the Committee and the chairperson and vice chairperson are selected at large.
Pursuant to Rule of Discipline 5, the Advisory Committee may render, upon the request of a Nebraska attorney, an advisory opinion or an interpretation of the 'Rules of Professional Conduct' regarding anticipatory conduct on the part of the requesting attorney. An attorney requesting an opinion from the Advisory Committee must prepare and submit a statement of the specific facts upon which the opinion is requested and a memorandum directing the attention of the Committee to the pertinent 'Rules of Professional Conduct' and relevant case authority. The chairperson of the Advisory Committee may waive this requirement in appropriate cases.
The Lawyer’s Advisory Committee’s website can be found here: https://supremecourt.nebraska.gov/administration/professional-ethics/attorney-discipline-ethics/lawyer-ethics-opinions
Omaha World-Herald Writer Matt Hansen’s Bitcoin article with an interview of Matt McKeever can be found here:
Copple, Rockey, McKeever & Schlecht website can be found here: www.greatadvocates.com
Matthew McKeever’s contact information can be found here: https://www.greatadvocates.com/attorneys/matthew-s-mckeever
General information about Bitcoin may be found here: https://www.coindesk.com/information/what-is-bitcoin/
Other Sources of Information:
Mr. Edward Weniger, CEO of AlphaBTC, LLC in Omaha, NE. http://alphabtc.com/
Ms. Elsbeth Magilton, Executive Director of Space, Cyber and Telecommunications Programs at the University of Nebraska College of Law. http://law.unl.edu/elsbeth-magilton/
Contact:
Matt McKeever
Copple, Rockey, McKeever & Schlecht
402.371.4300
msmckeever@greatadvocates.com