Bitcoins, Business, Contracts And The Law

How to get paid?

As a business,  methods of accepting payment have increased over the years.  No longer are you limited to a cheque or cash, most business now accept credit and debit cards through a merchant bank facility, bank transfer or payment via online websites such as Paypal.

There is a new form of payment which is becoming increasingly popular in America but businesses around the world will soon have to start seriously considering whether or not to set up their own 'Bitcoin Wallet'.

A bit what wallet you ask?  A Bitcoin Wallet is set up in order to be able to send and receive the Internet's newest and seemingly most popular digital currency, a Bitcoin.

If you have never heard of a Bitcoin and have no idea how they work, the best thing to do is to research on the Internet, there are also some pretty good explanations of how a Bitcoin works on You Tube.  I will not waste your time explaining it here as it is a subject which is far deeper and more technical than I could attempt to conquer in a short blog post.

What I do know however is that the rise in popularity, mainly in America at this stage (always the early adopters) is that eyebrows are being raised within Government Departments at the popularity of an alternative, virtual currency.  Questions are being asked around the globe about tax implications, the regulatory position of traders and exchanges. Also whether or not Bitcoin is a potential threat to any economy where citizens move away from normal fiat currency and decide to use a currency that the Government has no control over.

The Governments of the world are already onto Bitcoins and are looking closely at how they can regulate/control the situation.   Governments openly state they are worried that virtual currencies are used for money laundering purposes  - look at the recent closure of Liberty Reserve in Costa Rica, shut down by the United States Government for allegedly holding $6Billion of criminal proceeds.

What are the benefits of accepting this potentially volitile Bitcoin now?

Firstly, early adopter businesses will have the benefit, especially in the UK of being able to market their services on the publicity of being the first operator in their industry to accept Bitcoins as payment.  It could potentially open up a whole new market to you - there are many Bitcoin entrepreneurs who are looking of new ways to spend their digital currency.

Selachii Solicitors have stated they may accept Bitcoins as payment for legal advice as long as all regulatory measures are met. Are we the first firm of Solicitors in the UK to accept Bitcoin?

Of course, as the virtual currency becomes more and more popular, legal disputes will arise between customers and businesses which leads to some really interesting legal problems.  For example, can I sue someone in court and expect damages to be paid to me in Bitcoins?  The answer is potentially yes.

How about exchange rates, fluctuations in the Bitcoin value,  Jurisdictional issues with contracts for cross border contracts involving payment in Bitcoins.

Taxation issues arise - how would HM Revenue and Customs be able to prove what profit you have made (or lost) in Bitcoin transactions and, can HM Revenue and Customs charge tax on Bitcoins?  After all, it is simply a virtual currency which physically does not exist.

The use of Bitcoins warrants much more discussion but I can assure you, those discussions will be coming to a tax office and a solicitor's firm near you in the very near future!

Richard Howlett is a solicitor at Selachii - 02077925649