Financial Technology, Bitcoin and Cryptocurrency 1/11/18 01/11/18 11:58:30 AM
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Matthew McKeever, a lawyer with Copple, Rockey, McKeever & Schlecht P.C., L.L.O. takes digital currency seriously. His law firm will soon accept bitcoins.
Financial Technology, Bitcoin and Cryptocurrency
By Dennis Friend
The Daily Record
Bitcoin. Blockchain. Crypto-currency. The words are meaningless to a lot of people, but not to Matthew McKeever, a lawyer with Copple, Rockey, McKeever & Schlecht P.C., L.L.O., who takes digital currency seriously.
“It looks like currency but the United States does not consider it currency,” McKeever said. “It’s considered a commodity and its value changes according to the market.”
McKeever readily concedes that Bitcoin is known for wild fluctuations in value, pointing out the first known Bitcoin transaction was a pizza purchase for 10,000 bitcoins.
He first learned about Bitcoin in December of 2012. “I watched it until 2013. I watched as values rose and crashed. Then I learned how to get bitcoins,” McKeever said.
He recalled his first bitcoin purchase in April of 2013.
“I bought two at $87 each. The values rose to $160 in one week. I cashed in and gave the money to my wife. She deserved every penny because all I did that week was talk to her about Bitcoin,” he said, adding that on Dec. 14, 2017 “they’d each be worth $16,200 had I kept them.”
According to McKeever, “Bitcoin with a capital ‘B’ is used to refer to the software and computer protocol. The term ‘bitcoin’ with a lowercase ‘b’ is used to refer to units of measure on the ledger book created by the Bitcoin software.”
Copple, Rockey, McKeever & Schlecht P.C., L.L.O. will soon accept bitcoins.
“We will be the first law firm in Nebraska to accept bitcoins as far as we know,” McKeever said. “We have a number of clients who want to pay in bitcoins.”
According to McKeever, the firm decided more than a year ago that it could accept this form of digital currency as payment for legal services, but the Nebraska Lawyer’s Advisory Committee cemented that decision with an opinion released in September. A press release sent by the committee stated “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.”
No other state’s lawyer advisory committee had previously issued any opinions about accepting Bitcoin for payments, McKeever said.
Bitcoin is defined as “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,” according to the committee. Bitcoin and similar programs have been called “digital currencies” or “virtual currencies.” Mathematics and encryption are part of the equation producing digital currencies. Protocols such as Bitcoin are alternatively called “crypto-currencies.”
“It’s a product of network computers and part of blockchain technology,” McKeever said, adding that it essentially is a way to send money from one account to another. He also compared virtual currencies to frequent flyer miles, which allow purchases without handing over currency.
“When you pay online [with bitcoin], it’s instantly converted to dollars by a payment processor, so there’s no risk for fluctuation,” McKeever said, adding that a number of companies accept bitcoins, such as Jones Brothers Cupcakes. As attorneys who accept bitcoins as payment for fees and expenses, his law firm had to adopt a number of protocols to comply with the advisory committee’s opinion.
TD Ameritrade, an online brokerage based in Omaha, began allowing customers to invest in bitcoin futures. However, the brokerage requires potential bitcoin futures traders to maintain a minimum account balance of $25,000 in cash, according to a recent article in the Omaha World Herald.
McKeever said Nebraska “is rapidly growing into a hub for payment processing and ‘fintech,’ the new field of financial technology. 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 also are developing applications using the software foundation of Bitcoin, known as blockchain technology, to create other applications that don’t involve payments. But Bitcoin is becoming ubiquitous.”
The rising use and popularity of digital currencies have created new legal issues, McKeever said.
“I’m a legal advisor, not an investment advisor. We give legal advice about digital currencies and have done so for the last five years,” McKeever said. His law practice includes “advising clients on the developing digital currency regulatory framework.”
There are problems ranging from paying capital gains tax on bitcoins to the disposition and handling of bitcoin accounts when someone dies, he said.
The recent opinion from the advisory committee stated that an attorney may accept bitcoin and other digital currencies for payment, but under certain circumstances. Attorneys are required to mitigate the risk of volatility by notifying the client that the attorney will convert the currency into U.S. dollars immediately and credit the client’s account accordingly.
Bitcoins can create estate planning problems and McKeever said some knowledge of digital currency should become part of an attorney’s legal practice.
The opinion also stated an attorney may 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 years after termination of the client relationship.”
Money man Warren Buffett is not a fan of Bitcoin or other cryptocurrencies, telling the Washington Post last month that there are two kinds of assets: one produces a stream of income and the other is speculative, dependent on the price going up.
His summation: “It will come to a bad ending.”
McKeever, however, thinks Bitcoin and others of similar ilk are rapidly becoming a recognized form of payment internationally. But he emphasized that “the unique features of digital currencies and blockchain technology create new problems and the need for additional awareness by any attorney dealing with finances in a modern age.”