NODE40 is a blockchain platform for blockchain hosting and blockchain asset management. The NODE40 team will be telling us more in this interview.
1) Briefly tell us about you.
Co-founder Perry Woodin Chief Executive Officer of NODE40
My interest in blockchain technologies started with the financial incentives that digital currencies use to encourage network participation — from early Bitcoin mining to Dash incentivized full nodes.
Co-founder Sean Ryan – Chief Technology Officer of NODE40
For most of my career, I worked as a software engineer in a range of sectors including State government, academia, consulting, and various non-profits. My entrepreneurial debut began with the founding of NODE40 with Perry Woodin. Receiving digital currencies from our customers meant I had to really understand accounting for this new asset class. That deep dive lead to our flagship accounting product.
2) What is NODE40?
We founded NODE40 in 2015, initially focused on blockchain stability by hosting incentivised second-tier nodes, though we soon observed a gap in the market where effective accountancy software was needed for cryptocurrency investors.
NODE40 Balance was our response to the confusion experienced by those investing in cryptocurrencies and tokens when it came to calculating taxes. We’ve been fine-tuning the software for accountancy and accurate reporting insofar as digital assets are concerned, allowing users to interface with their various exchange accounts, view their profits/losses, annotate the various transactions with useful information, and even generate automated forms for the taxman.
3) What is wrong with tax laws relating to cryptocurrency and the wider world of tech in the US and beyond?
Broadly speaking, legislators seem to be preoccupied with shoehorning digital currencies into existing legal frameworks, without giving much consideration to the intricacies of the networks or the tokens issued on top of them. Whilst the US and European countries seemed to be making headway in this domain back in 2014, there’s been little deliberation or tax guidance offered since then, leaving investors largely in the dark. A more appropriate approach would be to expand each regulators’ rules to talk specifically about cryptocurrencies. Even by authorities classifying the asset as a commodity, or security, or property, or currency falls short within their own guidelines because conflicts can arise between them that might require court involvement. The confusion isn’t just bad for effective enforcement of regulations. It’s bad for participants in the space trying to stay above board but inadvertently running afoul of some obscure rule in some agency somewhere.
4) Why is it important to clarify cryptocurrency tax laws?
Everyone’s talking about mainstream adoption, and there are a few obstacles to clear before we get there – better UI/UX for wallets and platforms, improved scalability and institutional investment.
One of the largest hurdles to widespread adoption, however, is undoubtedly an appropriate legal framework. Many individual investors and businesses do not want to get involved when the tax status of cryptocurrencies and tokens are unclear, for fear of falling astray of regulation.
5) What mistakes do you see businesses and individuals making with regards to cryptocurrencies?
The blockchain tells a very precise story about transactions. The biggest mistake we see people make is trying to apply accounting methodologies like FIFO or LIFO ex post facto. Such trade strategies are considerations to made at trade time, not tax time. For the sake of accuracy, it’s important to use a service like ours that produces an audit trail of what has actually occurred on the blockchain to backup your tax position. Failing to report transactions properly to the relevant tax authorities is a setup for future headaches.
6) Would you advise people or businesses to accept cryptocurrencies as payment?
It depends on the business model. For transactions that need to be confirmed instantly (say, at a coffee shop), existing methods like cash or card may be better – layer 2 solutions are being developed now which allow for near-instant settlement. Payment channels, the lightning network, and Dash InstantSend are a few examples. For the likes of online businesses, where instantaneous transactions are not a priority, it’s very simple to deploy something like BTCPay to accept a myriad of cryptocurrencies – provided those companies are willing to risk holding such a volatile asset (though automated fiat off-ramps exist, too). It can be far cheaper to transact in cryptocurrencies than over traditional payment networks but the volatility makes it a poor unit of account so balance sheets will need periodic adjustments when they include digital assets.
7) What do business leaders need to know about cryptocurrencies?
Clearly, they’re here to stay. It’s been ten years since the first Bitcoin block was mined, and the cryptocurrencies since have seen a non-stop deluge of innovation working to make them faster, more scalable, and easier to use. Denationalised currency allows for lower transfer fees, and puts security in the hands of the funds’ owners, as opposed to a third party like a bank.
They’re not exempt from the law, however. Much of the regulations are ambiguous, so it’s important to maintain meticulous records, especially when actively trading. Spreadsheets aren’t often up to the task, so crypto-specific software is highly recommended in order to keep track of cryptocurrency related inflows/outflows, profits and losses.
Work with experts in the industry. As the space matures, we are seeing more individuals specializing in all aspects of cryptocurrency: accounting, tax, legal, security, and more. Business leaders should be aware of who these experts are and how to leverage their services.
8) Where do you see NODE40 in five years time?
We’ll continue to build software that takes the tedium and uncertainty out of tax reporting where cryptocurrencies are concerned, constantly improving it to reflect what we hope will be more focused legislative frameworks here and abroad. With such legislation, we expect the needs of our customers to evolve and we intend for our platform will continue to be a leader in tax analytics within the space.
Visit https://www.node40.com/ for more information.