The future of payment for legal services - The Bitcoin?
Would you accept payment for legal services in bitcoin? Should you? What is a bitcoin?
It's digital currency that avoids traditional banking fees and limitations of regulations; but is it safe.
Is it safe? I'm not sure, but with governments devaluing currencies it's probably going to increase in use and value. After all once governments decided to go off the gold standard the only value to money is in the full faith and credit of the government that issues it. If the government devalues it's full faith and credit then the money they print becomes worthless forcing people to seek other ways of payment. It's really no different than bartering for services. Instead of accepting dollar bills you take chicken to make chicken soup for the family.
According to the Bitcoin Organization bitcoin is an experimental new digital currency that enables instant payments to anyone, anywhere in the world. Bitcoin uses peer-to-peer technology to operate with no central authority: managing transactions and issuing money are carried out collectively by the network. Bitcoin is also the name of the open source software which enables the use of this currency.
Bitcoins avoid banks and government clearing houses thus avoiding fees and probably judgement creditors. They are transferred person to person. The user needs a digital wallet.
Let's say a client offers payment for legal services in bitcoin. You accept his payment and make the transaction by transferring his bitcoin to your digital wallet. You then use it to buy something you need to run your practice that is sold on the Internet. But how do you account for the transaction for income tax purposes? That's the part I don't understand and so lawyers will be pretty hesitant to venture into using bitcoin.
Wikipedia on Bitcoin - Bitcoin is a decentralized electronic cash system using peer-to-peer networking, digital signatures and cryptographic proof to enable irreversible payments between parties without relying on trust. Payments are made in bitcoins (abbreviated BTC), a digital currency issued and transferred by the Bitcoin network. Nodes broadcast transactions to the network, which records them in a public history after validating them with a proof-of-work system.
REFERENCES
- What is Bitcoin? by Weusecoins
- Bitcoin Charts or exchange rates for world currencies
- How to deposit cash for Bitcoin
Comments (1)
Read through and enter the discussion by using the form at the endPeter Surda - January 19, 2012 8:44 AM
Hello,
I have been performing research of Bitcoin for about half a year, primarily from economic point of view, but also had to investigate the legal view. Even though there are very few publicly known precedents in the whole world, most likely Bitcoin transactions are to be treated as barter from the point of view of taxation. It means personal income tax, corporate tax, sales taxes where applicable (or VAT/GST). If you sell Bitcoin for cash, that is subject to capital gains tax.
From practical point of view, it's almost the same as accepting your national currency (such as USD). The main differences are:
- sales tax (though probably not in USA since it has no general sales tax) for sale of Bitcoins
- selling Bitcon for the national currency (e.g. USD) is subject to capital gains tax, similarly as with foreign currencies
PS I am not a lawyer and this is not legal advice.