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“Crypto Investors Need Better Tax and Accounting Tools”, says CEO of ZenLedger

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Crypto investor

ZenLedger.io is a Seattle-based startup that helps individuals and CPAs with their taxes with cryptocurrency investments. They are VC-backed and have a team of 10.

Cryptotapas sat with Pat Larsen, CEO of ZenLedger to discuss what makes ZenLedger different from other crypto tax software in the market, and Larsen’s thoughts on the evolution of the crypto investment space and the future of blockchain technology.

CT: What made you start ZenLedger when there are other Cryptocurrency tax solutions in the market?

Pat: “Before getting into tech, I was an investment banker, so I’m pretty familiar with finance and accounting. I ran a business unit at Amazon followed by an eCommerce startup.  I was coming off of the eCommerce startup and wanted to get back on the forefront of technology. When cryptocurrency hit the mainstream in 2017, I kept talking to smart people in the space and brainstormed about solutions to some structural issues in the space and landed on the tax idea.

We felt that other platforms could use some improvements. When we talked to existing users of these platforms. our suspicions were confirmed. We gathered the feedback and put that into building a better product that is easy to use and provides accurate tax forms. Getting an investor or CPA accurate accounting in crypto across multiple exchanges and wallets is not an easy task, but it is a valuable problem to solve.”

CT: What is the biggest differentiator of ZenLedger compared to other crypto tax software out there?

Pat: “Transparency and customer friendliness, which manifests in a couple of things.  One is our Unified Accounting Spreadsheet that shows all transactions in one place along with our backend calculations that will be immensely helpful in case of an audit, or for tax professionals that want to show detail to their customers.

Our customer service is incredible. People have been quite surprised when we respond to their questions during the night or on weekends. It just shows how serious we are about this business, which is often lacking in the crypto space. ZenLedger will give you a summary for free after you upload your transactions, and then you can pick the appropriate plan for the complexity of your return. We’ll also be releasing a tool to help with tax loss harvesting. It’s been a tough year for everyone.”

CT: We have to be honest here. We did not think you would respond to our questions and request over the weekend, but you did. That is just a testament to what you said about customer service, and we certainly appreciate that you are bringing true business candor to the Crypto space. Now onto the next question.

CT: What is your vision for ZenLedger?

Pat: “I think there are going to be opportunities that present themselves, perhaps in security tokens if they get traction. Whatever form Security and Utility tokens take going forward, ZenLedger can continue to be more of a picks-and-shovels type of financial layer of services in the Blockchain space.

If people start earning income in multiple Cryptocurrencies from multiple sources or charge fees for their services in Crypto, that starts looking a lot like ADP or SAP does with daily, weekly or monthly accounting along with annual tax assistance. Since data is already structured in ZenLedger, we will see more utilities for services like ZenLedger and more opportunities will present themselves as this ecosystem evolves into a daily use case.


We also want to keep improving our core technology. From an accuracy standpoint, we are always fine-tuning our algorithms to track transactions, and filling in lots of holes that are created when cryptos are moved between wallets and exchanges.

CT: How big of a team do you have at ZenLedger?

Pat:  “We have 10 people; 6 developers and rest are on the business support side.”

CT: How many exchanges do you support right now and how many are you going to bring onboard for 2018 tax year?

Pat: “We continuously add exchanges to the platform. We also provide extensive Wallet support. We cover all the major exchanges and wallets and many of the smaller ones. Coinbase, GDAX/CoinbasePRO, Binance, Bittrex, Kucoin, Kraken, Poloniex, Jaxx, Trezor, Ledger…etc.

CT: How many countries do you currently support?

Pat: “Our primary focus is the United States to help individuals with tax forms, however, individuals from other locations can benefit from our reports as well.  We will keep looking to support other countries as regulations become more clearer.”

CT: Isn’t ZenLedger the only Crypto tax software that supports FBAR Filing, FinCEN Form 114?

Pat: “That is true.  What we do is pull the peak value from the exchanges, irrespective of how many assets you own, so that you can include that information on FinCEN Form 114.  We currently do not support direct import of data to FinCEN since there is a lot of personally identifiable information that goes on the form. We provide values for FBAR and FATCA purposes.”

CT: People either do not know about FinCEN filing requirement or they forget, but we believe it is an important disclosure with serious repercussions for non-compliance.

Pat: “FBAR reporting is quite important and has serious consequences for non-disclosure. If you have more than $10,000 of peak assets in a foreign exchange like Binance or Huobi in a calendar year, you have to fill out a FinCen 114 FBAR filing.”

CT: Do you only support retail customers or are you also supporting CPAs?

Pat: “We support retail investors and provide CPAs with workflow management to help provide services to their customers.  CPAs do not have to pay licensing fees. They can create free accounts to start serving their clients. That way, each taxpayer’s transactions can be handled separately and costs can be passed on to taxpayers or bundled into the CPA’s bill.”

CT: ZenLedger allows users to upload their transaction detail and view the tax summary information for free. They can wait to pay for the services when they decide to download the tax forms. Is this going to be available for 2018?

Pat:  “Yes, we plan to keep that form of feature available for our customers for the 2018 calendar year.”

CT: Where do you think the blockchain and crypto space is headed next?

Pat: “As more talented individuals spend more resources and time in this space, we will see applications that bring blockchain use cases to life. Obviously, we will see innovations in the supply chain management, joint ownership of assets to share revenue, etc.

Interesting models where individuals get paid for their time and attention will also emerge as a first case model for blockchain use cases. Transferring value across borders, eating into the money transfer business, can also be a great use-case, and an area where we will see solutions in blockchain space coming out sooner than others.”

CT: Is there anything you want our readers to know that we have not asked you about?

Pat: “We take customer service very seriously, and that translates into a product that is easy to use and handles transactions accurately. We continuously talk to CPAs to ensure that we are updating our software to mirror the regulations so that our customers can be sure of the quality we provide them.”

CT: Thank you, Pat, for taking the time to chat with us today. We appreciate it. 

Thank you for reading this article.

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IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

CryptoTapas does not endorse or guarantee the accuracy of the information and claims made in respective publications referenced in this database.

About the author

RK Reddy holds two Masters degrees, one in Accounting and another in Business Administration with over 15 years of experience in the financial services industry.

RK Reddy is an ardent fan of Blockchain and Cryptocurrencies. You can see the excitement about this new technology in every article on Cryptotapas.com. Sometimes this excitement leads to an overly optimistic view. Guilty as charged. RK Reddy says what may seem like an ‘overly optimistic expectation’ today may become an everyday norm in 5-10 years; look at the history of cars or airplanes, Blockchain and Cryptocurrencies belong to a similar frame of reference.”  Of course, that is just his opinion.


CryptoSpace

Why this bull run has no precedence? ONE key metric to rule them all

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bull run 2020

Everyone is singing the praises for the bulls’ arrival in the crypto space.

Some say that 2020 will mark the biggest bull run in cryptos’, albeit short, history.  

We are already in October so we doubt any fireworks will take place now since there is a lot of uncertainty about the US elections.

Add the uncertainty around the stimulus bills, unemployment trends, soon to be lifted forbearances and the list goes on.

2020 still has another 2.5 months to go but most of these uncertainties will take a while to show their true impact.

For instance, what will a Biden presidency mean for the economy and cryptos?  

How many people will be forced to sell their homes once the forbearance’s are lifted?

What happens if the next stimulus bill does not pass through?

When will the vaccine become available?

These are some of the unique situations that we have no precedence for. Do not let anyone convince you that we know what’s going to unfold, because no one does.

Yes, everyone has theories, like the ones we are presenting here, but that is all they are: theories.

The BIGGEST metric that crypto community is not considering

We are no economists nor can we run any fancy charts to impress a point on you.  

We are just good observers and have common sense to deduce a few things based on data.  

For instance, between 2007 and 2010 consumer spending dropped by an overall .2% and we know what that meant for the economy.

Personal consumption expenditure

In 2020, people have literally cut down on their spending.  Some of it is forced due to the restrictions imposed by external forces and most of it is self imposed.

I am sure the spending on marijuana, liquor and food have gone up but what about other spending?

2020 also saw a spike in the savings balances.  

Economy is not stimulated by people hoarding their money. People need to exchange value for the economy to thrive.

What happens to the spending behaviors when the true stats around evictions, lost jobs (that are not coming back) and small businesses that are shutting down permanently are out?

Our guess is that people are going to be weary of spending money in the short to medium term. If we were forced to pick a timeline – we would say about 12-16 months (assuming we get a vaccine in Q1 2021).

When is the next bull run? 

Based on what we have seen in 2007 through 2010 and observing the consumer spending habits in recent times, we think that Bitcoin (and cryptos) will not find their true peak until next halving.

We know this is not what you came to hear.  

If the bull run in your mind is hitting the 2017 highs then we do not think you have to wait until the next bull run.

If the bull run means a $100,000 bitcoin then we stand by our opinion on when that is going to be.

A case for bull run

In spite of what is going on in the street, following factors are acting as strong bull market signals for the crypto space. 

Hype: Crypto space (specifically Bitcoin) has been gathering a lot of steam in terms of brand awareness and mass penetration.  This is great for the long game.

Adoption: More than ever, private and public enterprises are becoming serious about bitcoin and underlying blockchain technology.  What is good for bitcoin is good for blockchain and vice-versa.  MicroStrategy investment, Paul Tudor Jones getting involved with bitcoin are some examples.

Tech explosion: Crypto space is home to some of the brilliant minds in the tech space. Add Big Techs interest in the crypto space and you have a perfect recipe for monumental shifts in crypto perception. Tech giants like Microsoft, Google, Twitter, Facebook are all getting involved with blockchain and cryptocurrencies in some shape or form.

Retail demand: More and more retail investors are looking for alternative investments and they are waiting on the sidelines to get involved with Bitcoin.  As soon as companies like Fidelity or other brands offer crypto investment through retirement plans – there would be a massive influx into this space.

DeFi: DeFi in its current state might be infested with shittty projects but as a concept and technological shift to turn the current banking system upside down – it holds great potential. Any demand to DeFi brings more demand to bitcoin, ethereum and blockchain in general.

Conclusion

The debate around when is the next bull run will hinge on how the market recovers from this pandemic. How soon will we get the vaccine and how many of the lost small businesses and jobs are we going to resurrect?

From a macro perspective, Bitcoin and few select cryptocurrencies will continue their upward trajectory so if you looked back to 2020 five years from now, you might think bitcoin was on sale.  

Question is: how many people have that kind of patience?

Thank you for reading and sharing this article. We appreciate you.

Stay safe and healthy!

Top 5 Cryptocurrencies 2020

IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

 

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CryptoSpace

Is Cryptocurrency driven by fundamentals or hype?

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Fundamentals or Hype

During the early 2000s India experienced a massive real estate bubble. With a lot of western companies opening their outsourcing centers in India, the land prices shot up 2x, 5x, 10x, and even 100x.

You read that right. 

Have you heard about 100x in Real Estate?

To be sure, the demand was exponentially growing in the major cities like Bangalore, Hyderabad, etc., which were quickly turning into back offices for the many western companies.

The hype in these cities was somewhat justified.

However, here is the kicker.  Many remote places which did not directly benefit from this influx of foreign direct investment started seeing their prices go up in similar fashion.

In a crazy case of trickle effect and super-hype created by the real estate agents, properties were just trading from one party to another for unbelievable markups and the prices constantly went up.

Today, that massive bubble is still intact minus the crazy multipliers.

The reason we like the comparison of what happened in Indian Real Estate market to the crypto is that a genuine need in a specific space has been exploited to translate that hype onto anything tagged with the name. 

In India that hype tag was ‘land’ and in crypto that hype tag could mean anything from ICOs to DeFi.

Ask any crypto enthusiast they will make you believe that crypto is all about fundamentals.  However, anyone who has spent even a few months in the space quickly realizes that crypto prices don’t follow fundamentals.  

This is one place where Crypto space shares its similarities with the stock market as well.

Stock market is completely distanced from the economy and it too acts irrationally, that is, when people are losing jobs and businesses are shutting down permanently, the stock market rallies higher and higher.

Similarly, crypto space, to its own detriment, is ignoring the projects that have amazing fundamentals while pumping other projects solely based on the hype.

Long term vs. Short term

Hype is short lived. Fundamentals are a long game.

That is why we emphasize that anyone interested in the crypto space does their own research in finding the projects that meet their fundamental criteria.

Once you know that a project has fundamentals (team that can execute, problem worth solving, solution that can solve, market demand, etc.,) then you just ignore the FOMO and FUD.

This will help you sleep better and use your spare time and energy in quality endeavors like taking care of yourself or spending time with family, etc.,

If you get on the hype train – it will be difficult to catch the right wave and this constant lookout for the next big thing is going to rob you of all the peace.

And, if you find yourself on the right side of the wave – you will be decimated and drowned.

DeFi defies all common sense

That is what happened with a lot of people who tried to ‘time’ the DeFi market.  

Don’t get us wrong. Many people made a ton of money (and good for them).  However, remember, crypto at this point of its evolution is a zero sum game.  That means, for everyone who made a million someone lost that million.

Unless you got on a project quite early keeping your risk level low or you have some insider information (not to mention this being illegal), you can generally not ‘time’ the market.

Many veteran traders have lost their shirts in chasing the market.

Conclusion: does this mean I should stay away from DeFi?

We cannot tell you that.  That is something you got to decide for yourself.

By market cap, Yearn Finance is considered one of the top DeFi projects. It lost over 67% in less than a month.   

Personally, if the top most project is still trying to find the ground while other projects are losing 99% of their value in a matter of a day, that means one thing:  the space needs time to mature.

We will continue to learn about DeFi. We will continue to invest what we can afford to lose when we find the right project that meets our fundamentals criteria.

That is our strategy at the moment. You have to find a strategy that suits you.

While crypto space is riding on the hype at the moment, we continue to believe in fundamentals.

Thank you for reading and sharing this article. We appreciate you.

Stay safe and healthy!

Top 5 Cryptocurrencies 2020

IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

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CryptoSpace

Will India Ban Cryptocurrency Trading?

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Cryptocurrrency Ban India

India keeps playing with the emotions of the crypto community in India with constant back and forth of change in rules.

First it was a complete ban of crypto transactions. RBI forbids banks from serving any clients that deal in cryptocurrencies. Thanks to the Supreme court decision, RBI had to back off.

Now, there is a renewed effort to place a ban on crypto again.  

Is Crypto Ban a good thing for India’s financial future?

No, Cryptocurrency is here to stay according to many financial investors and billionaires. As nations prepare for a hyper-inflation cycle to sweep the world, Cryptocurrency can act as a hedge in addition to gold and silver.

If the government is concerned about illegal activities with cryptos then they can relax because most crimes happen in fiat cash transactions, not crypto which is traceable.

Crypto traders generally are not the ones that take part in illicit trades.  It is those who introduce illegal ICOs and OTC trades.

How about regulations?

Instead of banning crypto trades, how about bringing clear regulations to provide a framework for the crypto trading.

Such a framework should include stricter guidelines for ICOs and OTC trades.  

Crypto exchanges can relay the trading information directly to the tax authorities (instead of needing to be subpoenaed) so that there is transparency.

Will India Ban Cryptocurrency Trading?

That depends on whether India wants to be in the ranks of the United States, Switzerland, South Korea, etc., or if it wants to be counted among China, Russia and North Korea.

The United States, South Korea and Switzerland (along with other countries) are doing everything to stay ahead in the blockchain and crypto race.

Other countries we stated above are working to stomp on the innovation. 

A better question is: Can India ban cryptocurrency trading?  

The answer is NO.  

To ban cryptocurrency trading – India will have to shut down the internet.  

In the event of an actual law that bans Indians from participating in the cryptocurrency trading, the only people that will be impacted by those are the ‘honest’ citizens because the crooked ones will still find ways to trade using VPN or alias names.

For a country that wants to be at the forefront of technological revolution a ban would be a very backward decision.

We urge the Indian government to NOT punish the honest citizens by introducing a ban.  Rather, introduce a sensible legal framework for everyone to operate in.

This will bring more businesses to India and take India’s platforms to the world.

Thank you for reading and sharing this article. We appreciate you.

Stay safe and healthy!

Top 5 Cryptocurrencies 2020

IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

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