Editor’s note: Jim Verdonik and Benji Jones, Co-Founders of Innovate Capital Law and frequent contributors to WRAL TechWire.

RALEIGH – Jim Verdonik and Benji Jones, Co-Founders of Innovate Capital Law discuss how fintech businesses are making it easier for merchants and customers to use cryptocurrency in every day transactions.

JIM:  WRAL Techwire asked us to talk about whether businesses should accept payment in bitcoin and other cryptocurrencies.

BENJI:  Of course they did.  We’ve been advising clients about cryptocurrency issues since 2017.  We’ve seen all the cycles.   Bitcoin was valued at about $4,900 in mid-March 2020.  Now it’s at ten times that amount.  Anything that increases in value so quickly is interesting.

 JIM:  You’re our law firm’s Chief Financial Officer.  I know that lawyers are allowed to accept payments from clients under certain circumstances, because I obtained an ethics ruling from the NC Bar back in 2018.  So, here’s a question:  Should our law firm be accepting Bitcoin as payments for our legal fees?

Benji Jones, left, and Jim Verdonik. (Photo courtesy Innovate Capital Law)

BENJI:  I spend enough time keeping track of payments when clients pay using credit cards, ACH transfers and old fashioned checks.  I’m not eager to add more complications.

JIM:  But Apple accepts payment is cryptocurrency.  So do telephone and utility companies.

BENJI:  I know.  But they have big finance and tech support departments.  We do everything ourselves.  We need simple.

JIM:  What if I told you that over thirty million Americans own Bitcoin.

BENJI:  That’s a lot of potential clients.  Tell me more.

JIM:  And Bitcoin and other cryptocurrencies are used a lot in cross border transactions.  So, there are many other potential clients around the world.

BENJI:  We do a fair amount of international work.  So, that may be useful.  But is it worth the hassle?  It would have to be a big client to make it worthwhile.

JIM:  Well, many fintech businesses are working on eliminating or reducing the hassle for paying ordinary bills with cryptocurrency.

BENJI:  Now, you have my attention.  More money and less hassle?  How is that happening?

JIM:  You can choose to handle these payment transactions yourself and actually receive the crypto currency into your own digital wallet and then you can trade the cryptocurrency for fiat currency on an exchange.  If it goes up or down in value between the time you receive it and the time you sell it on the exchange, you will have a taxable gain or loss on the difference.

BENJI:  I thought you said less hassle.  That’s making my life more complex.

JIM:  That’s the way you had to do it until recently.

BENJI:  What has changed?

JIM:  Fintech businesses are providing digital asset gateways.  Your customer pays the gateway and the gateway deposits U. S. currency in your account.

BENJI:  Is it expensive?

JIM:  Most digital assets gateways don’t charge merchant fees like credit card companies do.  So, you save that merchant fee.

BENJI:  What’s the catch?  Nothing is free.

JIM:  Digital gateways generally make money the same way banks make money exchanging foreign currency.  For example, if you change U. S. Dollars to Euros, the exchange agent gives you fewer Euros than the current market price on a trading exchange would give you.

BENJI:  Do these gateways just deal in Bitcoin?

JIM:  No. Most gateways deal with multiple coins.   Each gateway has different policies about which coins they accept and charge different spreads.

BENJI:  How do I choose the best gateway?  What due diligence should I do before I choose?

JIM:  First, find out how much of a spread the gateway is charging for the exchange.  Other points include how long you are at risk of the cryptocurrency decreasing in value.  What goes up quickly can often decrease in value quickly too.

BENJI:  I don’t think I want to be holding cryptocurrency very long.  What’s typical?

JIM:  There are two ways to play this.  One is that you have an account at the gateway that holds the cryptocurrency until you want to sell it or spend it.  You decide how long you want to hold it.  There you are taking market risk.  The other type of service automatically sells the cryptocurrency as soon as it is received.  That reduces your market risk. It’s similar to when you buy something using a credit card from a foreign vendor.  The vendor usually gets paid by the credit card company in their own currency.

BENJI:  I like to deal with name brands.  Do they have good security against hacking?  Do they have the financial resources to pay me if they are hacked?  Are these gateways established financial businesses?  Or will I risk them disappearing in the night with my money?

JIM:  Until recently most gateways were new fintech businesses.  But established payment processing companies are starting to move into the space.  For example, PayPal recently announced that it will allow consumers to pay their monthly invoices in cryptocurrency.

BENJI:  OK, that sounds like clients paying in cryptocurrency is becoming a real thing.  What are VISA and Mastercard doing?

JIM:  So far, they are watching.  If PayPal starts attracting a lot more customers and transaction volume increases because of the ability to pay in cryptocurrency, the other big payment processors may be forced to join the party to protect their market share.

BENJI:  If that happens, then the big cryptocurrencies really will be spendable like U. S. Dollars and Euros.  So yes, maybe we might find ways for clients to use coins pay their legal fees in the future.