Tax preparation service provider, an indispensable component on the path to compliance for crypto companies

The newly-financed crypto asset tax agreement Cryptotax can automatically generate tax reports for crypto companies.

Today (July 8) Austrian crypto asset tax reporting company Blockpit announced the completion of a Series A financing of more than US$10 million. This round of financing was led by MGV with participation from Fabric Ventures and Force over Mass Capital. The financing will be used for the development of encrypted tax products and the layout of the global market.

Cryptocurrencies have existed for more than a decade, but it is difficult for legislators to properly tax them, and most exchanges and investors have a little knowledge of tax filing rules, especially in areas with uncertain regulatory attitudes. It stands to reason that as long as cryptocurrency-related activities are carried out under the requirements of the anti-money laundering law, all crypto asset taxes must be paid.

In 2014, the U.S. Revenue Service (IRS) issued a legal statement on cryptocurrency for the first time to help tax advisors and individuals tax crypto assets. In 2019, they released a new revised version of the guide and provided a FAQ page on the website. Since the publication of the first draft, almost every aspect of the laws and regulations related to the taxation of cryptocurrencies has changed. Until the beginning of this year, the EU AML5 and FATF travel rules specifically mentioned cryptocurrency taxation. With the emergence of more new encryption technologies and behaviors, such as airdrops, hard forks, lock-up dividends, liquidity mining, etc., even experts in this field can hardly keep up with changing gameplay and regulations.

(Note: The “travel rule” was first proposed by the US Financial Crime Enforcement Network in 1996 as part of the “anti-money laundering” standard for all financial institutions in the United States. In March 2013, the rule was expanded to apply to crypto exchanges.)

Another notable trend in recent years is that leading crypto companies represented by Canaan Technology and Coinbase (mainly concentrated in mining companies and exchanges) choose a more traditional corporate growth path-listing. In this context, a team that provides professional legal, financial, and tax services to the crypto world has become a rigid need for compliance. 

Blockpit and CryptoTax (now merged) are a group of tripartite institutions that tried cryptocurrency tax filing in the early days, and they acted as a bridge between exchanges and regional governments.

Blockpit was established in 2017. Its main business is the crypto-asset tax agreement Cryptotax, which is used to automatically calculate data related to crypto-asset transactions and other activities (such as from mortgage, DeFi, lending, mining, and margin transactions), and to import and standardize it in real time. Then calculate and generate reports through the tax laws of specific countries and regions to show taxable profits and other important data.

In terms of tax filing, it imports user transactions by providing API and CSV for enterprises (Blockpit also launched a separate application in the app store in June), and uses transaction data to automatically calculate taxation of encrypted assets. In addition, it can download verified tax returns in PDF format and obtain complete tax returns in various currencies. Currently supported transactions are Bitpanda, Kraken, Coinbase, Bitfinex, Binance, Bitstamp, Bittrex, Coinfinity, HitBTC, Kucoin, LiveCoin, Poloniex, Bitcoin.de.

Coinworld-tax filing service provider, an indispensable component on the path to compliance for crypto companies

Secondly, it also has the function of portfolio management, consolidating all transactions and income in one dashboard to facilitate the total income overview of assets (divided into short-term and long-term income), as well as additional classifications such as investment income and other income. In addition, it can seamlessly transfer operating data between the exchange and the wallet, and display the current holdings and recent gains and losses of each currency. This is closer to the custody function of traditional wallets or exchanges.

Coinworld-tax filing service provider, an indispensable component on the path to compliance for crypto companies

Blockpit’s current customers are part of the above 13 exchanges, and the other part is composed of tax consultants, banks and governments. The cooperation between Blockpit and the authorities first covered Germany, Austria and Switzerland, and now, 70% of the crypto tax business in the European market is occupied by Blockpit. Currently, expansion plans for global jurisdictions such as France, Spain, the United States, Canada, Australia and the United Kingdom are also being closely prepared.

In addition to Blockpit’s Cryptotax, similar tax agreements include Tokentax. TokenTax was created by Alex Miles with a background in traditional law and investment banking. The product initially imported data directly from Coinbase and won the Product Hunt global hackathon. In 2019, TokenTax acquired Crypto CPA, a cryptocurrency tax accounting firm, and introduced CPA Andrew Perlin internally.

Tokentax has more outstanding tax reporting capabilities for on-chain transactions. In addition to traditional centralized exchanges, Tokentax began to support DeFi protocols such as 1inch, Uniswap, and Aave at the beginning of its establishment. It has now helped 18 countries/regions worldwide provide encrypted tax services. .

Coinworld-tax filing service provider, an indispensable component on the path to compliance for crypto companies

In fact, on the road to compliance, the development trend of tripartite analysis/monitoring companies, including tax reporting companies, has always been in the ascendant. According to statistics, in 2020 alone, there will be more than 20 such companies that have long-term and steadily purchased services, such as Chainalysis, Cyphertrace, and Elliptic. These companies provide data monitoring, analysis, and calculation functions, and are committed to bringing the necessary transparency and trust to the blockchain-based financial market; on the other hand, due to the uncertainty of laws and enforcement measures in the encryption field, these institutions also have In order to minimize the function of enterprise-level user audit expenditures, it has become an indispensable “staff” for the compliance of exchanges and wallet-type blockchain companies.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/tax-preparation-service-provider-an-indispensable-component-on-the-path-to-compliance-for-crypto-companies-2/
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