Investors have had years to get used to accounting for tax on traditional asset classes such as stocks and bonds. But the growing popularity of cryptocurrencies and related assets poses new challenges for retail and professional investors. Enter Binocs, a fintech startup announcing a successful $4 million seed funding round today as it launches a tax and compliance solution for crypto investors.
The attention of regulatory and tax authorities on crypto is growing around the world, says Tonmoy Shingal, CEO and co-founder of Binocs. “We have already seen over 20 countries make tax and regulatory changes in response to crypto and I expect another 50 to do the same over the next few years,” says Shingal. “It’s something that investors are going to have to manage very carefully.”
The problem for investors – both in retail and in the institutional space – is that tracking crypto requires different skills and technologies than those deployed in administering other asset classes. In particular, transaction data is kept in blockchain ledgers which can be difficult to access and decipher for those unfamiliar with how the systems work.
Binocs believes its technology provides a solution to this problem. Investors connect their crypto accounts to Binocs’ app and it displays a read-only view of the underlying data to produce the reports required for tax and compliance purposes. The app can be used to track multiple crypto accounts simultaneously, which also makes it a convenient way for investors to get a unified view of their holdings and positions.
“Tax and compliance firms try to manually build solutions to do this kind of work,” adds Shingal. “But it’s difficult – you have to be able to read the registers and be able to interpret potentially thousands of data points to identify the relevant transactions and their exact nature.”
The challenge for Binocs is to ensure that the results of its tools correspond to the needs of investors in the country where they pay taxes and must manage compliance, even if the systems vary from country to country. So far, Binocs is tax compliant in the US, UK, Australia, South Africa and India, although it expects to launch in other major markets in the coming months. .
The target audience is global – and growing rapidly. The total market capitalization of the crypto industry has grown from $325 billion two years ago to over $1 trillion today. Over 300 investors worldwide now hold some form of crypto asset and that number is expected to double by 2025.
So far, Binocs has focused on building and testing its tools, working primarily with around 2,000 retail investors to refine its product. The tool was provided to them for free, but Binocs is about to start charging, with tiered service levels based on investors’ trading volumes and the features they need. These tiers start at $49 per year and then increase, with Binocs promising institutional investors a more personalized pricing model built around their individual usage.
Shingal believes that Binocs can not only ensure that existing crypto investors stay on top of their tax and compliance work, but it can also help new investors feel more comfortable with the asset class. “There is huge interest in crypto, but it seems very complex for some investors,” he says. “We try to make it as simple as possible.”
Indeed, Binoc claims that its app will be able to calculate most investors’ tax debts in less than 30 minutes. And for investors managing multiple accounts, the ability to access unified portfolio tracking, as well as a consolidated account of their tax positions, could prove very useful.
The next step for Binocs is to prove that investors will pay for its service in large numbers. Shingal says today’s seed funding round will help in that regard, giving the company additional firepower to invest in its products, as well as resources to invest in leveraging initiatives. market.
The $4 million round is led by BEENEXT and Arkam, with participation from Accel, Saison Capital, Premji Invest, Blume and Better Capital. “Crypto native organizations will need solutions like Binocs to help them with their compliance, accounting and bookkeeping,” says Anirudh Garg, investor at BEENEXT. “This is a great market opportunity to build an easy-to-use, yet powerful system early on.”