By Christopher M. Ferguson
Journal of Tax Practice & Procedure
Introduction: The cryptocurrency (“crypto”) economy appears here to stay. Notwithstanding the recent “crypto winter,” the use of, and trading in, bitcoin and other crypto-currencies has exploded over the last several years. Once viewed as mysterious, fringe operators regulated to the web, cryptocurrency exchanges have become major actors in the global economy, with the largest, such as Coinbase, making public offerings. Major financial institutions have been scrambling to get in on the act. In April, financial services giant Fidelity introduced Bitcoin as a retirement investment option in employee benefit plans. And as recently as last month, Mastercard announced that it will be launching a cryptocurrency payments card that will permit users to process credit card transactions using bitcoin and several other cryptocurrencies.
As cryptocurrency has become more widely used across the global economy, the number of clients seeking to use it to pay for legal services is increasingly dramatically, forcing many professionals to become familiar with this new medium of commerce. At the same time, while cryptocurrency possesses many similar traits to fiat currency, it is still a very different animal from its more tangible relative, carrying with it very different tax, reporting, and ethical obligations. This article endeavors to familiarize counsel with some of the unique issues one can expect to encounter when entering legal services arrangements where payment is made using cryptocurrency.
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Published with permission from the Journal of Tax Practice & Procedure.