Investors have had to get used to taxing traditional asset classes such as stocks and bonds for years. But the rising popularity of cryptocurrencies and related assets poses new challenges for both retail and professional investors. Enter Binocsa fintech start-up announcing today the successful completion of a $4 million seed fundraiser as it launches a tax and compliance solution for crypto investors.
Regulatory and tax authorities’ focus on crypto is growing globally, said Tonmoy Shingal, CEO and co-founder of Binocs. “We have already seen more than 20 countries make changes to taxes and regulations in response to crypto and I expect another 50 to do the same in the coming years,” Shingal said. “This is something that investors need to be very careful about.”
The problem for investors – both in the retail and institutional space – is that tracking crypto requires different skills and technologies than those employed in managing other asset classes. In particular, the data on transactions is kept in blockchain ledgers that can be difficult to access and decipher for those unfamiliar with how the systems work.
Binocs believes that its technology offers a solution to this problem. Investors plug their crypto accounts into the Binocs app and it pulls a read-only view of the underlying data to produce the reports needed 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 are trying to manually build solutions to do this kind of work,” Shingal adds. “But it’s hard — you have to be able to read the ledgers and potentially interpret thousands of data points to identify relevant transactions and their exact nature.”
The challenge for Binocs is to ensure that the results of its tools fit the needs of investors in the country where they pay taxes and need to manage compliance, even though the systems differ from country to country. So far, Binocs is tax compliant in the US, UK, Australia, South Africa and India, although it is expected to launch in other key markets in the coming months.
The target audience is global – and growing rapidly. The total market cap of the crypto sector has risen from $325 billion two years ago to over $1 trillion today. More than 300 investors worldwide now own some form of crypto assets and the number is expected to double by 2025.
So far, Binocs has focused on building out and testing its tools, primarily working with approximately 2,000 retail investors to refine its product. They got the tool for free, but Binocs is on the cusp of charging fees, with tiered service levels depending on investors’ transaction volumes and the functionality they need. Those levels start at $49 per year and then increase, with Binocs promising institutional investors a more customized pricing model built around their individual usage.
Shingal believes that Binocs can not only help existing crypto investors stay on top of their tax and compliance work, but it can also help new investors familiarize themselves with the asset class. “There is a huge interest in crypto, but it feels very complex for some investors,” he says. “We try to make it as simple as possible.”
Indeed, Binoc says its app can calculate most investors’ tax liabilities in less than 30 minutes. And for investors who have multiple accounts, the ability to access unified portfolio monitoring, as well as a consolidated account of their tax positions, can be very valuable.
The next step for Binocs is to prove that investors will pay for its service in large numbers. Shingal says today’s funding round will help in this regard, giving the company additional firepower to invest in its products, as well as resources to invest in go-to-market initiatives.
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 need solutions like Binocs to help them with their compliance, accounting and bookkeeping,” said Anirudh Garg, an investor at BEENEXT. “This is a great market opportunity to build an easy-to-use, yet powerful system at an early stage.”