5 reasons why Inksters will not be taking payment in cryptocurrency or paying their consultant solicitors in cryptocurrency
A fee-share law firm this week announced that it is the first top 200 UK law firm to take payment in cryptocurrency. They claim this means it can work with a wider variety of clients and its ‘partners’ (self-employed consultant solicitors) can be paid how they choose.
They are, of course, not the first law firm to do so in the UK with others having done so as early as 2013.
Inksters is also a fee-share law firm but will not be following suit. Here are 5 reasons why Inksters will not be taking payment in cryptocurrency or paying their consultant solicitors in cryptocurrency:-
Cryptocurrencies can fluctuate widely in value. Inksters would not expect their consultant solicitors to agree a fee in Ether that might end up being a small fraction of the pound sterling equivalent upon payment.
2. Lack of Regulation
The current lack of regulation in the cryptocurrency market has seen many scams, hacks and market manipulations. It is therefore not an area that Inksters would wish to be seen in or have their consultant solicitors be part of.
3. Money Laundering
Cryptocurrencies are susceptible to money laundering activity. The predominant reason is anonymity. Individuals and criminal organisations can mask their true identities by using different aliases and pseudonyms, essentially allowing transactions to be conducted anonymously.
4. Slow and Cumbersome
Due to their complexity and their encrypted, distributed nature, blockchain transactions can take a while to process, compared to “traditional” payment systems such as cash or debit cards. Bitcoin transactions can take several hours to finalise.
5. Environmental Harm
Cryptocurrency transactions use a huge amount of computing power and vast amounts of energy. The electricity used per year to mine bitcoin surpasses the annual energy usage of many countries in the world.
For these reasons Inksters will not be taking payment in cryptocurrency or paying their consultant solicitors in cryptocurrency. Instead Inksters will continue to take payment, and pay their consultant solicitors, in good old fashioned pounds sterling.
If you want to work with a law firm that takes regulatory and environmental concerns seriously get in touch with Brian Inkster for a chat about the many benefits of being a freelance consultant solicitor in Scotland’s foremost fee-share law firm.
Reactions on Social Media
There have been reactions to this post on LinkedIn where the following comments have been made:-
Paul Hainey MBA CBA® FSA (Purpose-Driven Business Strategist and Architect):
Bravo Brian Inkster , good 4 u 👏 👏 .
I think that Blyth and Taleb speak particularly well to this too ?
Jane Clemetson (Lawyer extraordinaire: media, IP, commercial, tech and data protection):
I completely agree with you
Rory Webber (Technophile. Cultural anthropologist. Strategy Director):
I hear your concern Brian, and I’m in no way trying to convince you to change your business practices.
Crypto is (relatively) new, so there is an expectation of concern around change, especially in the conservative legal industry.
1. You can specify(in your contract) the value in GBP/USD/etc at a set time and the ETH payment has to equal that at time of payment. Also, there are cryptocurrencies pegged to the USD, making them stable (eg USDC).
2. By definition, crypto is decentralized, to be honest if that’s a non-starter for you, then you need go no further.
3. I assume Know-Your-Customer laws would still apply, much the same as fiat currency payments?
4. Cryptopayments are much faster than cheques, drafts etc and processing fees are less too.
5. There are (many) cryptocurrency alternatives to Bitcoin with much less environmental harm e.g. Solana or Polygon.
Again, its of course your business, I’m just trying to help a decade-long connection to know a little bit more about the opportunities.
Brian Inkster (CEO Inksters):
Thanks for your thoughts Rory, which have made me think more deeply about the topic.
Having done so I would comment further on each of the five points as follows:-
1. Of course, you can. However, that involves entering into a contract with the client regarding how you require payment. It introduces another layer of bureaucracy and, as this has to be agreed to first, just might slow down getting on with the legal work in hand.
You might also have to ask your client to get separate independent legal advice on the terms of this payment contract!
It also introduces the prospect of a client having enough cryptocurrency to meet the fees agreed but when the date for payment arrives the value of their holding has dropped and they can no longer afford to pay you. Another good reason to be very aware of the potential volatility of cryptocurrencies that could leave you out of pocket.
Even if you do receive the agreed sum in cryptocurrency then unless you plan to hold onto it you are likely to then have to convert it into GBP Sterling. If you are not quick, then again the value could drop.
I note your reference to some cryptocurrencies that are pegged to the USD, making them stable. I did a Google search on “cryptocurrencies pegged to the GBP” and found mentions of a few that, not surprisingly, I had never heard of before. This included a lot of fanfare about the launch of LBXPeg in 2018 although I can see no reference to it since. TrueGBP and GBPX appear to be ones that are currently on the go.
However, I note that, unless I am missing something, in the last 24 hour period, TrueGBP fluctuated in value by 10.6% and was worth at one point in that period £0.87 and at another £0.97. I still think I would rather just know I was getting £1 Sterling for every £1 Sterling received!
Also, I read that stablecoins may not be stable and that’s a problem.
If you decide only to accept pegged cryptocurrencies you will be limiting the market place and may make the exercise of saying you will accept cryptocurrency payments simply not worth the effort.
2. If decentralised means that scams, hacks and market manipulations should be taken as granted then yes, to be honest, it is not for me and I don’t think should be for any lawyer!
As David Gerard said about decentralisation in ‘Attack of the 50 foot Blockchain’: “decentralisation is very expensive and doesn’t get you much, at the loss of efficiency and control. Recentralising immediately makes the system much more efficient.”
I am all for efficiency and thus will happily stay with my centralised GBP Sterling.
3. Know your customer and evidence of source of funds, of course, will still apply. The known use of cryptocurrency in money laundering activities might just heighten the game a bit if accepting that as payment rather than GBP Sterling.
Whilst a blockchain supposedly shows evidence of who owned the cryptocurrency and when you may need to look beyond that to see what the source of funds were before they entered a blockchain or possibly before they were transferred to your client.
The bureaucracy surrounding this is likely to be much more onerous than GBP Sterling transferred to you from a mainstream British clearing bank.
4. I was not comparing cryptocurrency payment with cheques or drafts. Whilst we do still get the occasional cheque the vast majority of payments come directly into our bank account by same or next day payment. Same day payment is practically instantaneous when made and next day will be in your bank account first thing the day following the day on which payment is instructed. I do believe that you may rely more on cheques and drafts in the USA than we do at this side of the pond.
As the principal of a law firm in Scotland regulated by The Law Society of Scotland I must ensure that funds received from clients pass through our clients account and are recorded on clients’ ledgers. I assume, therefore, that a separate cryptocurrency ledger would need to be set up for every cryptocurrency you were dealing in. Thus, more bureaucracy to comply with rather than just simply maintaining the one Clients Bank Account and associated ledger.
5. Again, like stablecoins, if you decide to accept only the less harmful to the environment cryptocurrencies you will be limiting the market place and may make the exercise of saying you will accept cryptocurrency payments simply not worth the effort.
The fact is that there are apparently nearly 10,000 different cryptocurrencies in existence as of February 2022. Keeping track of all of these and those that you may or may not accept payment of would be an administrative headache.
There are many Fiat currencies in the world and we, like most British businesses, only accept payment in GBP Sterling. It is for our clients if paying in a foreign currency to arrange for their bank to pay us in GBP Sterling and for them to meet and exchange fees. I do not really see why the position should be any different with cryptocurrencies. A client who wishes to pay from funds held in cryptocurrency should simply convert those funds to GBP Sterling before then transferring funds to us.
As one of Inksters consultant solicitors said to me “Whilst my local supermarket only accepts GBP Sterling I just want paid in GBP Sterling and not in cryptocurrency”.
Rory, as I said at the beginning I do thank you for this debate as it has made me think more deeply about the topic. I know you were not trying to convince me to change my business practices and having thought more deeply on it, I will not be for all the reasons given.
I do think the law firms who are managing to get a press release published in 2022 on accepting payment by Bitcoin are no different from the ‘metaverse lawyers’ getting publicity about opening a virtual office in the metaverse in 2022!
It is, really, just very old news. Some did that a decade or more ago. However, they are a very small minority, as most will continue without problem with their fiat currency of choice and a bricks and mortar office in the real world.
And for those saying they will accept payment in cryptocurrency and meet with clients in the metaverse the day to day reality is probably very different to that.
Got it. You don’t accept ANY currency aside from good old GBP. Fair play.
And I must say that no client has ever asked me to do so.
And I hear you about companies (of all industries) trying to refresh their brand by claiming leadership in the metaverse space.
Some are doing it the right way for the right reasons. Others not so much.
We both remember the amount of internet space junk created when social became popular a while ago. Plus ça change I guess.
If you haven’t seen it already you can read my thoughts on lawyers in the metaverse.
Thanks Brian. Just read it. Hilarious!
With every tech wave there are articles like yours – a healthy counterpoint to the hype. Just like with social media 15 years ago. Im sure you remember the various anti-social media articles at the time. I certainly do!
Even now, there are lawyers not on LinkedIn or that haven’t read blogs (or blawgs). And while their core business is solid, they still do well. I think the same will be case with the metaverse(s). Every company will pick its place on the spectrum of adoption. And good luck to them all.
Sajid Hussain (Pioneer In Developing Smart Legal Contracts With DeFi 2.0 Enabled Funding For Legal Services)
Replying to Rory Webber’s first comment in the thread above:
Tony Brown (Head of Compliance & MLRO at IFX Payments)
Also replying to Rory Webber’s first comment in the thread above:
Absolutely on point Rory. I find a lot of the fear around crypto is unfounded or based on snap shots / word of mouth. There needs to be a credible thought leader to come out with objective information for the masses.
I mentioned in my reply to Rory Webber ‘Attack of the 50 foot Blockchain’ by David Gerard. That’s a book from a credible thought leader with objective information for the masses. If you’ve not read it I would highly recommend it.
Amy Bell (Compliance Specialist for Professional Service Firms, Lawtech Co-founder, Author, Director, Solicitor):
Thanks for sharing Brian Inkster – I know many firms are considering this at the moment.
Thanks Amy. I hope they consider all the cons! You will see from the comments that there has been some debate and I have expanded my thoughts a bit. Any particular views on what extra things a law firm might have to do on the compliance front if taking payment in crypto?