How to Use Cryptocurrency in Legal Contracts in 2025

Using cryptocurrency in legal contracts isn’t just a tech trend-it’s becoming a necessity for businesses that operate across borders, handle digital assets, or work with decentralized teams. But here’s the problem: cryptocurrency isn’t cash. It’s not even like stocks or bonds. And if you treat it like any of those in a contract, you’re risking enforceability, tax surprises, or outright legal disputes.

Why Cryptocurrency in Contracts Is Different

Back in 2020, a New Zealand tech startup paid a developer in Bitcoin, assuming it was just like paying in USD. Two years later, when the developer sued for unpaid wages, the court had to decide: was the Bitcoin payment worth $50,000 at the time of transfer-or $220,000 when the case was heard? The judge ruled in favor of the developer, using the market value at the time of judgment. That’s not what either party expected.

Cryptocurrency prices swing wildly. A contract that says “pay 5 ETH” could mean $8,000 today and $25,000 next month. Without clear rules, courts have to guess what the parties meant. And in 2025, U.S. law finally gave courts a roadmap to stop guessing.

The CLARITY Act Changed Everything

In July 2025, Congress passed the CLARITY Act, which divided all digital assets into three legal categories. This isn’t just bureaucracy-it’s the foundation for writing enforceable crypto contracts.

• Digital commodities - These are assets like Bitcoin and Ethereum, where value comes from the blockchain itself, not from an investment promise. They’re treated like commodities, similar to gold or oil.
• Investment contract assets - These are tokens sold with the expectation of profit from others’ efforts, like unlisted tokens from a startup ICO. They’re regulated like securities by the SEC.
• Permitted payment stablecoins - These are dollar-backed tokens like USDC or USDT, regulated by banking authorities under the GENIUS Act.

Here’s the key: the type of crypto you use determines which laws apply. If you promise to pay 10 Bitcoin in a contract, you’re dealing with a digital commodity. If you promise 5,000 tokens from a new DeFi project, you’re dealing with a security. The legal risks are completely different.

How to Write a Crypto Clause That Holds Up in Court

Don’t write: “Payment will be made in Bitcoin.” That’s a lawsuit waiting to happen.

Instead, use this structure:

1. Identify the asset precisely - Use the full name and blockchain. Say “Bitcoin (BTC) on the Bitcoin blockchain,” not just “BTC.”
2. Define the value reference point - Pick one: the time of contract signing, the time of payment, or a fixed fiat equivalent. Most courts prefer the time of payment because it’s objective.
3. Specify the source of price data - Name a trusted exchange: “Value shall be determined using the average BTC/USD price on Coinbase Pro between 12:00 and 13:00 UTC on the payment date.”
4. State the delivery method - “Payment shall be sent to the recipient’s Bitcoin wallet address: 1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa.”
5. Include a fallback - “If the cryptocurrency cannot be delivered within 48 hours, payment shall be made in USD at the same value.”

For stablecoins, the rules are simpler. Since they’re pegged to the dollar, you can write: “Payment of $10,000 in USDC, delivered to the designated wallet.” No price lookup needed.

What Happens If You Get It Wrong?

In 2024, a California company signed a contract to pay a contractor in Ethereum. They didn’t specify the price source. When Ethereum dropped 40% before payment, the contractor sued. The court couldn’t decide if the company owed the original dollar value or the lower crypto value. The case dragged on for 18 months and cost $87,000 in legal fees.

That’s why clarity matters. The CLARITY Act and GENIUS Act created rules so courts don’t have to guess. But those rules only help if your contract follows them.

State Laws Still Matter

Even with federal rules, 15 U.S. states passed new crypto laws in 2025. New York’s BitLicense still requires businesses to get special approval before handling crypto payments. Texas allows crypto as legal tender for contracts. California requires disclosures if crypto makes up more than 20% of payment.

If your contract involves parties in different states, you must say which state’s law governs. Don’t assume federal law overrides everything. A contract signed in Florida but paid to a wallet in New York could be subject to BitLicense rules-even if the company is based in Arizona.

Smart Contracts Aren’t Magic

People think blockchain = automatic enforcement. But a smart contract is just code. If the code says “send 1 ETH to address X,” and the address is wrong, the ETH is gone. No court can reverse it.

Use smart contracts only for simple, automated tasks: releasing payment after delivery confirmation, or triggering a refund after a deadline. For anything involving dispute resolution, human judgment, or variable value, pair it with a traditional legal contract.

Example: “Payment of 2.5 ETH shall be released automatically via smart contract upon receipt of signed delivery confirmation. This release is subject to the terms of the underlying Master Service Agreement, which governs liability, dispute resolution, and force majeure.”

What You Can’t Do

Even in 2025, some things are still illegal or risky:

• Don’t use unregistered tokens as payment in employment contracts. The SEC may consider it an unlicensed securities offering.
• Don’t promise future profits tied to crypto holdings without SEC registration.
• Don’t ignore AML/KYC rules. If you’re a business accepting crypto over $3,000, you must verify the sender’s identity under FinCEN rules.
• Don’t assume crypto payments are tax-free. The IRS treats crypto as property. Every transfer triggers a taxable event.

Real-World Example: A Freelancer Contract

Here’s a clause that works:

“Client shall pay Freelancer $4,500 USD equivalent in Bitcoin (BTC) on or before the completion date. The USD equivalent shall be calculated using the average BTC/USD price on Coinbase Pro during the 24-hour period ending at 11:59 UTC on the payment date. Payment shall be sent to the Bitcoin wallet address: 1FreelancerAddress1234567890xyz. If BTC cannot be delivered within 72 hours, Client shall pay the full $4,500 USD via bank transfer. This payment satisfies all obligations under this agreement. All payments are subject to applicable tax reporting under IRS Notice 2014-21.”

This clause covers: asset type, value source, delivery method, fallback, and tax compliance. It’s enforceable in any U.S. court.

What’s Next?

The SEC and CFTC are working on a unified reporting system for crypto transactions by mid-2026. That means contracts will soon need to include transaction IDs and wallet metadata for audit trails. Start documenting every crypto payment now-even if you don’t have to yet.

Also, watch for new rules on DeFi protocols. If you’re using Uniswap or Aave to make payments, the legal status of those interactions is still being defined. Until then, stick to centralized exchanges for payment delivery.

Bottom Line

Cryptocurrency can make contracts faster, cheaper, and borderless-but only if you treat it like a legal asset, not a tech experiment. Use the CLARITY Act categories. Define value clearly. Document everything. And never assume blockchain means “no paperwork.”

The law caught up. Now it’s your turn to catch up with the law.