Bench & Bar

SEP 2018

The Bench & Bar magazine is published to provide members of the KBA with information that will increase their knowledge of the law, improve the practice of law, and assist in improving the quality of legal services for the citizenry.

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17 BENCH & BAR | Bick notes several concerns, with possible solutions: • Estate counsel should inquire about cryptocurrencies and the procedure by which the client has secured informa- tion for others to access them upon the client's passing, such as a sealed letter with the recorded transfer keys. • e client should either leave detailed authority to access cryptocurrency accounts in probate, or the client should retain third-party services to manage cryptocurrency ac- counts upon his or her passing. • Tax issues relating to IRS treatment of cryptocurrencies as property will require that gains and losses be recorded and reported. RETAINER/FEE QUESTION In concluding, we return to where we started, the phone call from the potential client, asking if you accept Bitcoin. Lawyers Mutual Insurance Company of Kentucky ("LMICK") has recently urged "all Kentucky lawyers and judges to inform themselves" on the risk management and ethical responsibilities of dealing with cryptocurrency. 26 Because price volatility could result in either underpayment (your risk) or an unreasonably high fee (the cli- ent's), LMICK recommends "converting Bitcoins into U.S. dollars immediately upon receipt" but also recognizes that this "fluid situation requires cryptocurrency continuing education." We hope this article is part of that. ABOUT THE AUTHORS MICHAEL LOSAVIO teaches in the Depart- ments of Criminal Justice and Computer Engineering and Computer Science at the University of Louisville on issues of law, society and information assurance in the computer engineering and justice adminis - tration disciplines. His focus is on law and social sciences as they relate to computer engineering, evidence and digital forensics. He holds a J.D. and a B.S. in mathematics from Louisiana State University. He lectured on computer law and crime at Perm State University in 2013 as a Fulbright Specialist. MARK WETTLE is a lawyer in Louisville. Wettle also teaches at the University of Louisville ADRIAN LAUF is an assistant professor in the Computer Engineering and Computer Science Department at the University of Louisville's J. B. Speed School of Engi- neering in Louisville, Ky. He completed his Ph.D. in electrical engineering at Vanderbilt University in 2010. Dr. Lauf 's research work seeks to integrate emerging embedded com- puting, networking and security applications with airborne robotics. He is the director of the Aerial Robotics Lab at the University of Louisville. ENDNOTES 1. Commodity Futures Trading Commission says yes. See CTCF v. McDonnell, 287 F.Supp.3d 213 (E.D.N.Y. 2018). 2. e Securities Exchange Commission says yes. Id. 3. Balaji Srivivasan "Despite Its Name, Bitcoin is Not Really a Currency, Says Digital Currency Entrepreneur," https://www.cnbc.com/2018/01/25/despite-its- name-bitcoin-is-not-really-a-currency-expert.html, accessed 7/15/2018. 4. e IRS calls Bitcoin "one example of a convertible virtual currency" and defines "virtual currency" as "a digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value." IRS Notice 2014-21. 5. For grammarians who may notice the vast inconsistency in current literature between lower case bitcoin and uppercase Bitcoin, we break with AP Style on this one and capitalize Bitcoin throughout, as a specific type of virtual currency. 6. Henry Miller, Money and How It Gets at Way (1 st ed. 1946). 7. Resources to help that understanding are multiplying. For example, Fortune magazine now offers a weekly online newsletter, e Ledger, devoted to crypto- currency and blockchain. 8. "Tulipmania" in the 17 th Century is often used "as a warning about the perils of a free market." Lorraine Boissoneault, "ere Never Was a Real Tulip Fever," https://www.smithsonian.com/history/there-never-was-real-tulip-fe- ver-180964915, accessed August 14, 2018. 9. Jen Wieczner, "$1 Billion Bitcoins Lost in Mt. Gox Hack to Be Returned to Victims," https://www.fortune.com/2018/06/22/bitcoin-price-mt-gox-trust- ee/?utm, accessed August 14, 2018. 10. e name Mt. Gox stood for "Magic the Gathering Online eXchange." Darryn Pollock, "e Mess that Was Mt. Gox: Four Years On," https://cointelegraph. com/news/the-mess-that-was-mt-gox-four-years-on, accessed August 14, 2018. Pollock provides a good history of both the genesis and downfall of Mt. Gox. 11. Adrianne Jeffries, "Inside the Bizarre Upside-Down Bankruptcy of Mt. Gox," https://www.theverge.com/2018/3/22/17151430/bankruptcy-mt-gox-liabili- ties-bitcoin, accessed 8/14/18. 12. Fortune June 22 article, n. 10, supra. 13. Charles Bovaird, "Could Bitcoin Fall to $4,000 In e Coming Weeks?" Forbes. com, August 10, 2018, https://www.forbes.com/sites/cbovaird/2018/08/10/ could-bitcoin-fall-to-4000-in-the-coming-weeks/, accessed 8/14/18. 14. Matt O'Brian, "Bitcoin is Still a Total Disaster," Workblog Perspective, e Washington Post, August 10, 2018. https://www.washingtonpost.com/busi- ness/2018/08/10/bitcoin-is-still-total-disaster, accessed 8/14/18. 15. John McCauley and Kyle Miller, Investors Aware: Cryptocurrency Fraud and Ponzi Schemes Are on the Rise," https://www.bizjournals.com/louisville/ news/2018/08/01/investors-aware-cryptocurrency-fraud-and-ponzi.html, accessed 8/14/18. 16. Id. 17. Ali Montag, "Yale Economist: Here's How Likely It Is at Bitcoin Will Become Worthless," https://www.cnbc.com/2018/08/09/yale-economist-how- likely-it-is-that-bitcoin-will-become-worthless.html, accessed 8/14/18. 18. CFTC v. McDonnell, supra. 19. 287 F.Supp.3d at 220-21. 20. Id. 21. See, e.g., the numerous examples provided by Judge Weinstein, including emer- gency actions by the SEC to stop the sale of "Plex Coin," FinCEN's assessment of over 4110 million in penalties against BTC-e, a virtual currency exchange, and New York's Department of Financial Services approving or denying licenses for virtual currency charters, depending on whether its own state standards were met. 22. Orcutt, Mike, "States at Are Passing Laws to Govern 'smart contracts' Have No Idea What ey're Doing," https://www.technologyreview.com/s/610718/ states-that-are-passing-laws-to-govern-smart-contracts-have-no-idea-what- theyre-doing/, accessed 8/14/18. 23. Tae Kim, "Top Technical Analyst Says It Could Be 'Game-over' for Bitcoin," https://www.cnbc.com/2018/08/09/top-technical-analyst-says-it-could-be- game-over-for-bitcoin.html, accessed 8/14/18. 24. Robert Hackett, "Bitcoin Is Giving Divorcing Couples Something New to Fight About," Fortune Magazine, February 26, 2018. http://fortune.com/2018/02/26/ bitcoin-divorce, accessed 8/14/18. 25. Bick, Jonathan "Estate Planning in the Age of Cryptocurrency," New Jersey Law Journal, http://www.lawjournalnewsletters.com/2018/06/01/estate-plan- ning-in-the-age-of-cryptocurrency/?slreturn=20180714175135, accessed 8/14/18. 26. "Cryptocurrency Is Alive and Well in Kentucky," e Risk Manager, Winter 2018 edition, http://www.lmick.com/item/cryptocurrency-is-alive-and-well-in-ken- tucky, accessed August 14, 2018. At the time of that publication, LMICK re- ported that "the only significant ethics opinion" on the issue of lawyers accepting Bitcoin comes from Nebraska, and discusses that opinion at length.

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