Accounting software provider Cryptio, together with venture capitalist Tim Draper, has launched its new platform – Ionic – in order to help bridge the gap between audit and tax reporting off the back of the US Infrastructure bill.
The new bill, recently signed by US President Joe Biden, addresses the new tax-reporting requirements for digital currencies and will force some crypto companies to provide a service ‘effectuating’ the transfer of digital assets to report information on their users.
Coin Rivet spoke with the Cryptio’s CEO – Antoine Scalia – on the implications of this development and recent events in the world economy.
Scalia explained that regulatory and tax authorities such as the SEC, IRS, and HMRC have established a focus on crypto businesses, demanding accountability and auditable records on their crypto activity.
He pointed out that crypto-native businesses, hedge funds, family offices, and company treasuries now face sophisticated accounting, audit, and compliance challenges.
“Cryptio Ionic delivers financial integrity & accountability for businesses and institutions in crypto,” said Scalia, adding that they can now reconcile their on-chain crypto activity, including DeFi with current accounting systems (Xero, Quickbooks & Netsuite).
According to Scalia, greater accountability means greater institutional adoption and crucially more transparency for the regulators and tax authorities.
“The infrastructure bill’s long-term implications will be far more substantial,” he said.
“As it stands, the US infrastructure bill introduces tax reporting requirements that expand the definition of a broker for Internal Revenue Service (IRS) purposes.
“The bill would require all brokers to report transactions under the current tax code.”
Bitcoin ETFs may be approved next year
He further explained that the term ‘broker’ was expanded to capture entities such as miners, decentralised exchanges, NFT projects and more.
In general, this would mean, Scalia noted, that crypto-native businesses will have greater reporting obligations.
“It is worth noting that there are vigorous open debates about how these reporting obligations should be structured – to better take into account the nature of the blockchain tech,” he said, adding that the imposed reporting obligations would be very difficult to meet for businesses delivering an on-chain service.
“VanEck’s Bitcoin Spot ETF would have been the first of its kind in the US, however, it was denied. The SEC’s explanation as to why they are hesitant to approve included comments regarding ‘manipulation in the markets where crypto is traded’ and ‘investor protection’,” he explained.
He added that spot crypto ETFs already exist in other jurisdictions (Canada and various European territories), but the US has been moving slower in this respect.
Scalia pointed out that the Ionic update marks a huge technical innovation in parsing, indexing, and processing on-chain data for accounting and reporting.
“We are running our own Bitcoin and Ethereum nodes and have built proprietary indexers that are able to transform this opaque blockchain data into ledgers ready for accounting and reporting,” he concluded.
“We are not reliant on public block-explorers like Etherscan and have built direct connections to the native chains.”
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.