Bitcoin – the most prominent digital currency in use today – is here to stay. The cryptocurrency, which has been around since 2008, has generated a lot of media as well as government interest. Several major investors, well known businessmen, CEO’s of large organizations and heads of governments have publically expressed their support for the digital currency. Richard Branson, the founder of Virgin Records, had this to say about Bitcoin, “Virgin Galactic is a bold entrepreneurial technology. It’s driving a revolution and Bitcoin is doing just the same when it comes to inventing a new currency.”
Lawyers, and law firms, are optimistic about Bitcoin and digital currency in general. “I think the whole protocol where you have a peer-to-peer, direct currency will still be around. That whole concept is amazing and will stay for a long time. It might be called something else or exist in a totally different form but it is here to stay,” said Christine Duhaime, a partner at Vancouver- and Toronto-based Duhaime Law and soon-to-be author of Bitcoin and Digital Currency Law.
Some law firms have started accepting payments in bitcoin. Law 4 Small Businesses a leading hi-tech law firm focusing on small businesses are accepting Bitcoin. “We are an Internet savvy, high-tech law firm and law practice, and accepting and honoring Bitcoin adds credibility to that claim,” says Laurence S. Donahue, attorney and founder of L4SB. Even Houston criminal defense lawyer Jay Cohen has been accepting bitcoin payments for a more than a year now. The RAM Law Firm, Bukh and Associates are other prominent firms that have joined the bitcoin payment bandwagon.
Perkins Coie is a prominent law firm that represents about 50 Bitcoin companies. It is amongst the first firms to offer legal consultation and advice about the digital currency. A partner at the firm, Lowell Ness, had this to say about the relevance of law firms to Bitcoin: “[It’s] almost impossible to get funding without having some kind of stamp of approval from a law firm saying there’s some regulatory strategy in place.”
Bitcoin, and digital currency in general, face several regulatory and legal challenges. Bitcoin is not regulated by a central authority. Of 40 jurisdictions surveyed by the Law Library of Congress, only China and Brazil have specific regulations about the use of bitcoin. As can be seen in the map from bitlegal.io, bitcoin’s legal status is very unclear in many parts of the world.
Exposing the Silk Road network brought such challenges to the forefront and raised some serious questions for real world prosecutors charged with preventing criminal usage of electronic payments. The crash of Mt Gox and the loss of 850,000 bitcoin worth $620 million, is another case in point. There’s currently not much legal recourse available to those who lose their bitcoin.
Lawyers and law firms would do well to sit up and take notice. They are faced with a unique challenge in trying to define the legal implications of this relatively new digital currency. Bitcoin is a phenomenon that could change the face of the world’s monetary system. It’s a good time for lawyers and legal professionals to get involved in the Bitcoin story. Lawyers can innovate alongside the Bitcoin entrepreneurs and find safe ways to prevent misuse of the network. As L4SB says, “A little law now can save a lot later”.