Solving Troubles with Tax, Accounting, & Compliance for Crypto Businesses

Tax, Accounting, & Compliance

Regulation is among the foremost concerns affecting the cryptocurrency market today, especially after the Terra-Luna debacle. Crypto-assets are inherently borderless, and present unprecedented financial stability risks. This presents a unique problem for policymakers. Regulators in various countries are working on creating frameworks to govern crypto assets and the businesses that use them.

There is also a lack of global consensus regarding the legal status of crypto-assets, even between regulatory agencies within a single government. For instance, the Commodity Futures Trading Commission (CFTC) treats Bitcoin as a commodity while the Internal Revenue Service (IRS) treats it as property. This presents a problem for businesses dealing with crypto in terms of financial reporting.

Presently, on top of the murkiness on the regulatory front, it is difficult, if not impossible to calculate cryptocurrency tax liability without sophisticated software. Furthermore, tracking the cost basis needs a “deep understanding” of how blockchain works. 

The unique characteristics of cryptocurrencies present another problem for regulators. For instance, there are broadly two different types of tokens being traded on exchanges: utility tokens which are not subject to disclosure rules, and security tokens which fall under SEC purview. 

Because Bitcoin and crypto don’t fit neatly into established asset categories, governments struggle to provide people with the clarification that they need to deal with cryptocurrencies. 

Not to mention, there are thousands of cryptocurrencies existing worldwide, going beyond just Bitcoin, Ether, and Dogecoin. And the lack of authorized information on digital assets and the technological complexities associated with them makes it imperative to put regulations in place to safeguard investors.

Given the rapid technological changes in the industry, sophisticated information infrastructure and professional financial advisors are required for investors to understand the technical risks of cryptocurrencies and make informed decisions.

While a lot of participants would welcome more clarity from lawmakers, it is yet to come. Amidst this cloud of uncertainty, confusion, and complexity, Request Finance has created a layer of proper documentation for crypto payments.

For the last few years, the firm has focused on simplifying the crypto payment experience for businesses, companies, DAOs, and freelancers dealing with crypto in a fast, secured, and compliant manner.

Ensuring Compliance

Request Finance offers a crypto invoicing tool for enterprises used today by thousands of web3 companies, including Aave, Maker, The Sandbox, and Fantom, to manage their crypto invoices in an easy, secure, and compliant way. Launched in 2020, the focus at Request Finance is on crypto regulation and compliance. 

With crypto payments being pseudonymous, companies using digital assets struggle to meet the tax and Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) reporting requirements. Besides AML/CFT rules, complying with capital requirements, strict IT compliance checks, and KYC (Know Your Customer) requirements, too, becomes problematic for crypto companies.

As there is no regulatory framework in place, crypto investors currently have little to no protection in the market. Companies have to maintain compliance with evolving federal and state regulators despite the challenges.

Cryptocurrency compliance is about meeting the requirements set in AML crypto regulations which require companies to implement proper internal policies. 

Cryptocurrency AML encompasses the laws, regulations, and practices designed to stop criminals from converting illegally obtained crypto assets into fiat money. It involves KYC, which is an effective way for an institution to confirm and verify the authenticity of a customer. 

As an unregulated system, in crypto, a client due diligence process is required akin to that of a bank. It can help keep track of investors’ real identities and verify their locations when buying or selling cryptocurrencies. 

Here’s where Request Finance comes into the picture. Request Finance’s specialized tools make it easy for companies to stay crypto compliant, helping CFOs, accountants, auditors, and authorities.

Request Finance’s tools allow for easy tracking, verifying, and organizing of all payment requests in a single place without any manual reconciliations. It further provides automatic notifications and real-time payment status with on-chain data.

Adding this layer of proper documentation to crypto payments has simplified crypto payments and financial reporting for crypto project teams, DAOs, and accountants. The idea is to help firms operating in the crypto space keep pace with the rising demand for compliance and mitigate financial and reputational risk.

Helping Build the Future

Investment in digital assets is fast moving into the mainstream. In 2021, the crypto industry touched a $3 trillion market. The global crypto ownership rate has also been estimated to reach past 300 million crypto users worldwide. On top of that, about 20,000 businesses are already accepting cryptocurrency payments.

Today, organizations dabbling in crypto need to monitor their compliance program effectively. Here’s where Request Finance is helping these firms meet quickly evolving and increasingly rigorous regulatory and investor compliance demands.

According to PWC, as the market infrastructure develops, crypto assets are expected to impact traditional asset management significantly. Already, crypto ETFs are available in several jurisdictions, and many funds are awaiting approvals from the SEC to offer Bitcoin ETFs in the United States.

Financial services firms of all sizes should also assume that their employees are trading in digital assets. Thus, firms should anticipate that they will soon be required to prove to regulators that the organization and its employees are held to the same standards regarding conduct risk and conflicts of interest when trading in crypto assets as they would be when dealing with traditional securities.

Request Finance’s sophisticated tools allow such companies to create a seamless financial experience while taking control of their finances in a decentralized and non-custodial manner.

From invoicing for companies and freelancers to allow for easy paying and getting paid in crypto, managing team expenses in crypto, automating payroll using crypto, and connecting to accounting software like Xero and Quickbooks, Request Finance is simplifying dealing in crypto. Besides, it enables firms to seamlessly monitor the preclearance and reporting of crypto investments, avoid cryptocurrency conflicts of interest, and ensure compliance. 

According to Request Finance, the most exciting opportunities lie in using programmable money and assets in the real economy for subscriptions, salaries, service fees, and more.

As such, Request Finance is helping finance, operations, and human resource managers at crypto-native companies cut out the drudgery of manual processes to focus on building the future of decentralized finance and the open metaverse.

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