Keeping up with tax compliance for cryptocurrency can be tricky, especially since many laws are new (or haven’t been written yet). That’s why Binocs was founded. Users integrate their exchanges and wallets, and Binocs provides a tax report and other accounting details. The startup announced today that it has raised $4 million to expand in markets like the United States, United Kingdom and Australia. The round was led by BEENEXT and Arkam with participation from Accel, Saison Capital, Premji Invest, Blume and Better Capital.
Founded in May 2022 by Tonmoy Shingal and Pankaj Garg and based in Bangalore, Binocs currently has over 1,000 users, including retail and institutional investors who need to perform forensic accounting and risk management. Binocs is currently tax compliant in the U.S., U.K., Australia, South Africa and India, with plans to add more markets next month. Part of the funding will be used for product development and Binocs’ go-to-market teams for retail and institutional investors.
Binocs can provide a tax report in less than 30 minutes. It also tracks return on investment, profits and losses and capital exchanges, as well as taxes for derivatives, lending and borrowing across CeFi and DeFi. The app can give users details on fees and tax deducted at source already paid on transactions so they understand how much taxes they need to pay.
Binocs founders Tonmoy Shingal and Pankaj Garg. Image Credits: Binocs
Shingal told TechCrunch that Binocs is meant to be a bridge connecting transactions on the blockchain to the “[Web 2.0] equivalent compliance world,” especially as the number of coins, exchanges, types of trade and DeFi protocols increase.
There are currently about 300 million crypto users, and that is expected to hit about 1 billion by the end of this year.
Binocs’ founders point to figures from the Coin Market Cap that say the total market cap of the crypto industry rose from about $325 billion in September 2020 to $1 trillion in September 2022. With a blended tax of about 20%, the overall tax liability is about $70 billion, a number that can increase to $300 billion by 2026.
Shingal, the startup’s CEO, said crypto hedges and investment funds often run with a small number of staff, and the process of calculating tax and performing compliance is time consuming because they have to pull data from multiple sources, merge it and then adhere to different compliance and reporting regulations for each type of transaction.
“The traditional approach is to collate and interpret the blockchain exchange ledgers manually. Doing which requires significant time, sophisticated knowledge about crypto transactions [and] local regulations,” Shingal said. “This task is time consuming and prone to errors, which could be costly.”
He added that regulations are one of the biggest obstacles to more adoption of crypto, with about 15 to 20 countries that currently tax crypto investments, and 60 to 70 that will in the future.
Binocs also plans to build more apps on top of its algorithm as it gets more data. “We think of ourselves as a data company that understands what is going on in crypto transactions and build applications for multiple use cases on top in the future,” Shingal said.
Binocs is currently pre-revenue and will monetize by operating on a freemium model, as well as an enterprise plan for business investors.