Anytime you're holding what this guidance defines as a crypto asset, So this excludes NFTs. I will caveat with that for any crypto assets held on the balance sheet recorded at fair value. So as of the date of my you know, the end of the quarter, I should say what is the price and what is the quantity of my bitcoin held, and that is the number that I will record it on my balance sheet.
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Yeah, thanks for having me, Reagan.
I have interviewed folks on tax from taxbit over the years, and we've talked a lot about what tax that has been doing to help different companies and even retail investors in the crypto industry. So definitely want to hear the latest updates, but also get your take on things like what the IRS is doing and the FASTB rules and so forth around companies holding bitcoin and so forth. But let's start with your background. Where are you from and what's your professional background?
Yeah, thanks for asking I'm from Indiana. I grew up a Hoosier, went to Indiana University. I'm a CPA by trade. I started my career at Deloit, spent some time at a large public company thereafter, doing all things internal and external reporting. I had a personal interest in crypto and moved out west and found tech Bit, which was a perfect combination of that professional background in financial reporting and CPA, but also paired with personal interest of crypto and blockchain technology.
So what sparked your personal interest? What was your first encounter and what was your aha moment?
My aha moment was really understanding and watching a bunch of YouTube about blockchain technology. This had to be about ten years ago. Actually, I started watching a bunch of YouTube reading about blockchain technology, understanding some of the efficiencies.
And utility there. So that was actually the inception of the interest.
And then you know, of course there was a ton of a ton of activity going on with bitcoin. I started hearing about people mining bitcoin. I'm also a freelance artist, and so the NFT space was particularly interesting for me, and you know, the thought of the use cases just I it piqued my interest and it's cool, it's exciting to see how the industry has evolved since then, and it will continue to evolve. And it's just fascinating to see companies like PayPal and Visa and even Nike a
few years back exploring the NFT space. You know, it's evolving and it will continue to evolve, but it's just fascinating to see these use cases start to actually play out.
So, yeah, absolutely, and what many will call now Web three, the transition from Web one to two point zero course, and now an entirely different world where users kind of have more ownership and the ability to do a lot more. Now, for those who may not know about tax bit, give us an overview of your services.
Yeah.
So Taxbit's mission is to enable the digital economy. And that's a broad statement. But I start there with that broad statement because tax bit has built, you know, modernized solutions for tax accounting and also public sector So if let's drill into each of those really quickly.
Here, accounting.
When I say accounting, I'm referring to accounting and financial reporting and all of the tracking that needs to happen for the individual transactions to do that consolidated financial reporting whether you're a public or a private company, and along
with that is the concept of journal entries. So if you think about legacy ERP solutions, you know, NetSuite, quick books, some of these solutions that have been around for a long time that most companies use regardless of their size, they don't traditional or they don't historically support digital assets, and so there's a need for this external solution because it's putting accountants and finance x or it's back in
spreadsheets completely. So these experts in their roles as a controller or a CFO or you know, their respective teams, they've taken steps back and are now doing everything in spreadsheets. And so there's a need for you know, either the existing ERP solutions or solutions like ours to enable companies to continue to explore the digital asset space and be efficient while doing it from a back office perspective. And that also relates to our tax solutions.
So if you think.
About the recent you know, regulation clarity that we're seeing, it's the same concept. There's a ton of underlying transaction data that companies need to track and record in a timely manner to comply with this regulatory clarity that we're starting just now starting to see. And then Finally, we have a public sector side of the house, so we build tos for government agencies to do the same exact thing.
So we're enabling you know, whatever groups of people, enterprises, government agencies to do their tax in accounting and whatever their respective reporting requirements are in a more you know, efficient manner.
So speaking of government agencies, of course, the i r S is the agency where everybody's focused on and what activities they have going on when initiatives. How have you been engaging with them and are there any interesting takeaways?
Yeah, in terms of the I r S.
So i'll speak high level here, we've been you know, we have been working close with the i r S. We have a contract with the i r S. We work closely with the i r S. We have built solutions for different government agencies. They are building out their team. This has become public information. You know, we have an individual that came from the IRS. The person that hired
me at tax Bit recently joined the IRS. So we are you know, we work closely with them in the sense that more from a thought leadership perspective, and we're enabling the IRS and other government agencies with solutions so that they can understand the space better and make informed decisions for the broader population.
Yeah. That's really great because I know there's been a lot of rumblings in the industry from people saying these government agencies don't get it right, and it's any education and advocacy. So it's great that you guys are engaging and helping them along the way because there's been things like the ten ninety nine DA form I believe issued by the IRS, with the industry saying hey, it's not dual.
Yeah.
Yeah, So any thoughts on that form and how the industry has been engaging.
No, I mean, whether it's that form or you know, an accounting topic or other forms that have been discussed, it's it's a matter of educating, educating the decision makers and helping them understand so that we can create realistic
and actually useful requirements for companies and individuals. So that's where I do believe there's been a ton of interesting conversation, and you know, I'm extremely passionate about what tax bit is doing because I literally I was on a call yesterday where we were having conversations with someone at a large exchange and it was simply a thought leadership conversation
that happened and after the bitcoint Nashville conference. And it's funny they were referring to this conversation as extra curricular work. You know, you have your your work that you're doing at your respective company, and it's really cool to see all these individuals come together outside of their you know, direct roles and responsibilities at their companies, coming together and you know, partnering and wanting to learn with.
Each other about what should.
The regulation be, what should the guidance be for accounting, what is realistic for individual taxpayers and also companies wanting to explore and grow.
In the digital asset space.
So we are so actively involved in these conversations on a weekly basis, and that's certainly one element of what keeps me extremely energized and also excited about the future for this space.
Yeah. Absolutely, and I think as with you, you know, you guys doing your advocacy and education the industry, continuing to give feedback. We can get get this right, and the government's different government agencies can get these things right. I did want to ask you about the FASTB rules, which are enforceable starting December thirty, first, twenty twenty four, and this is part of a bigger conversation of companies adding bitcoin to their treasury, you know, and using it
as a treasury reserve asset. Tell us about this rule, and I believe from what I've read, but you can correct me if I'm wrong that this is positive because it allows companies to easily at biitcoin to their balance sheet.
Yeah. Absolutely.
If you had asked me three years ago if I would get fired up about accounting guidance, I would have said no. But there is one thing that I do get very excited about in the realm of accounting guidance, and it is this specific topic because previous to this accounting guidance update, the guidance and requirement for companies.
I'll just simplify here the previous guidance. Here. If you were.
Holding bitcoin and you bought it for fifty thousand dollars, let's say, and the price dropped to twenty thousand, and then it went back up to sixty thousand, you were required as a company to record that initial at any loss that occurred. So anytime the price dropped below that initial cost basis value, the company was required to record an impairment loss and then was not able to record that increase in value at any later date until the
bitcoin was actually disposed of. And so if you were to look at micro Strategies balance sheet, for example, and their earnings, you would see pretty sizable impairment losses. So this was actually not accurate accurately representing the economics of the asset held at that time, and it's not there shouldn't be incentive to sell the asset to actually record and realize that increase in value, So it's not accurately. It was not previously accurately reflecting what the economics were
and what the true value was. And so now the guidance is okay anytime you're holding what this guidance defines as a crypto asset.
So this excludes NFTs.
I will caveat with that for any crypto assets held on the balance sheet recorded at fair value. So as of the date of my you know, the end of the quarter, I should say what is the price and what is the quantity of my bitcoin held, and that is the number that I will record my balance sheet.
Any change in value does go through earning still, but in an appreciating market or you know, whatever the price volatility is the company is you know, now able to take ownership and accurately represent what the economics are of the assets held.
So it is intended to.
Be a lower cost, lower complexity movement for the industry, which is really exciting because I think it is beneficial to the users of the financial statements and also the team doing the back office work. So it's making it This is the type of guidance from my perspective, that is actually enabling companies to continue to explore and grow in the space.
Yeah, that's really great and the fact that it's making less complex easier for both sides. As you mentioned, and I know from the macro there's a lot of companies looking to do this because of inflation, because of other assets not performing as well, and bitcoin has been like the top performing asset over the past I leave ten
to eleven years. So it seems to be like a global trend of companies adding bigcoin chair balance ing now because we're talking just the United States, but for us to remain competitive, it's good that these rules are you know, making it easier.
Yeah.
Absolutely, And I mean if you even if you think about the guidance from a global perspective.
We are now more in line.
With what is acceptable you know in Europe and companies following IFRS guidance.
So this is really exciting for the space.
And you know, not only is it saving companies time, ideally, it's it's let's say you've never touched crypto, you don't understand it, and you also don't understand accounting specifically. You know, there's a reason that we can go and trade stocks and look at a ten K if we want to to understand the financial health of a company without understanding the you know that that accounting guidance might not be the most up to date or you know, accurately representing
what the activity is. It might signal something that is not necessarily fair, if you will, to the company holding that asset. So this is really encouraging and I think over time will continue to see more and more clarity, hopefully based off of informed input from industry thought leaders. So I think this is all really really exciting stuff.
I don't know if you can answer is, but I'm curious as to have you seen more companies and corporates coming to you guys about these things. Given that bitcoin and crypto have gone mainstream that you got the ETF launches, you've got regulations kind of halfway through the whole legislative process, right got out of the FIT twenty one, get out of the house. Are you guys seeing more demand and more business because of these things?
Yeah, I would say we're there's a new energy in the space right now, and we're even seeing more demand from companies that you know, have been in the space for a while, and they're coming to us and they're saying, you know, you've been on top of this thought leadership element and educational you know, perspective coming from an educational lens.
I think has gone a long way for us because we've you know, we've stayed engaged and on top of these new regulations and this new guidance, and we've we've been building for this for a while, anticipating a lot of these changes because we genuinely want you know, we want to enable companies, and so it's it's been energizing to see companies come to us saying, you know, we've seen your thought leadership, We've seen you know, this educational
content that you're putting out. We want to understand how your solutions work now and so it is while we've seen more demand, we're also continuing to have conversations with you know, large institutions around Okay, you know, we're thinking.
About these projects. How how can we build with you to make sure we're doing this the right way. We want to we want to have.
The right the pipes in place before we take off, and that that's also been really exciting to see.
So key question here does it matter if a company adds bitcoin directly to their balance sheet versus if they buy the ETF. Let's say they buy black Rocks ETF and I don't know, I don't know the intricacies of these things and how it all works, but does that matter?
Yeah, So anyone, any company holding crypto assets will then record.
That asset held on their balance sheet. So it's the simple answer is.
Yes, got it. And what's on your roadmap for twenty twenty four or the remainder of twenty twenty four?
Yeah, in terms of roadmap, so two things I'll say. One, we are expanding from a global perspective. We're growing into you know, multiple different areas of the world, specifically Europe, Dubai, Latin America. There's an initiative to expand globally on all fronts, So not just accounting. I did mention you know, IFRS and GAP aligning more closely now, but from you know, from a tax form perspective and just from a general
information reporting perspective. What's happening at tax Bit. And the thing that keeps me extremely energized about what the company has built and can build is once you once once this company tax bit from a software from a solution provider perspective, once we have the underlying data and quality of calculations for those gay losses, we can put together any combination of form or report, and we can expand globally from there and also continue to iterate as we
see more regulatory clarity. So number one is we're expanding internationally.
And number two what I was alluding to there is as we continue to see clarity, whether it's the fast be for you know, accounting in the US, or there's changes to the international accounting guidance and that landscape, or there's updated information reporting requirements for this country, we are able to build to those things because we have the underlying calculation engine, and we also we have the infrastructure as a team to continue to build you know, we
raised over two hundred million dollars a handful of years ago, and we're we're in this for the long haul and as much as we can enable the space with modernized solutions, will continue.
To do that.
Let's talk about the crypto market at large. You know, we kind of touched on it earlier with the ETF launches Crypto going mainstream, Looking at your thoughts on that, and look, even presidential candidates are now suggesting the United States at Big One as a treasury reserve asset. It seems we're entering a new era of crypto adoption with politics integrated and much more.
Yeah, we are.
I mean at Bitcoin Nashville alone and in it to be fair, it was my first time attending that specific conference. I've been to a handful of the other conferences there.
The political representation blew my mind. And even hearing Michael Saylor speak about his outlook on bitcoin not only from a corporate adoption perspective, but from a global adoption perspective for nations in debt, I mean, it is just fascinating to see the intersection here between what you know, a few years ago might have been for retail the retail use case and now you have people speaking, you have presidential candidates and Michael Saylor speaking about the use cases
for nations and debt. I mean, it is, it is truly fascinating.
So yeah, and then I mean I didn't. I don't think people want to see crypto become politicized, but unfortunately some people and the government have made it that way and as a result, it seems like it's going to be an election issue. Certainly not number one, you know, for the majority of the nation, but for some people it's a single issue item for them, like they're like, hey, you're anti crypto, I'm going to vote against you. And
we're starting to see some of that. And what are your thoughts on it becoming this election thing and the industries raising campaigns, excuse to me funds to need to pro crypto candidates and so forth.
Yeah, I won't.
I won't comment too much there because I think, like any political topic, it can become polarizing.
But what I will focus.
On here is, you know, we are neutral from a political standpoint, and our mission is to build solutions to enable whatever the regulation is, and you know, keep users and institutions informed around what this regulation is. And how we can continue to You know, I again, like I said, any political topic can get noisy. We are focused on enabling companies, individuals, and government agencies with solutions to explore these different emerging technologies.
What are your thoughts on stable coins and tokenization? The stable coin market is heating up, and are some of your clients stable coin issuers or are some of them looking to use stable coins? And what are some of the tax implications and so forth.
Yeah.
No, I see stable coins having a lasting future as it relates to corporate adoption and use case. I mean, if you think about payment processing and international transfers, and a couple specific examples i'll give here, like Stripe helps merchants to accept stable coins and PayPal has launched a stable coin. I see this being a lasting use case
and stable coins fall under that same guidance. You know, one thing I'll say about stable coins specifically is at the surface, it might seem as if okay, I will record this one to one, I can say this is worth one dollar and I don't. I don't need to track any price volatility here. That was actually my outlook for stable coins. And then you think of the FTX use case, you still need to track what the actual price is because there is a scenario where that price
still does fluctuate. So same guidance applies to stable coins. But we are seeing more and more use cases as it relates to stable coins, and I think stable coins are actually an extremely approachable entry for you know, people who are not as familiar with the cryptos.
I think you could just I think you.
Could categorize the different crypto assets in so many different ways. So my, you know, my grandma, she might not care about having exposure to bitcoin and that price volatility or
the ether ETF. I think that I heard this comparison in a podcast I listened to recently where someone said, you know, the bitcoin ETF is more an investment and a desire for exposure to that price volatility and that actual asset, whereas the eth ETF is more of exposure to the underlying technology and the blockchain that will continue
to build on there. So I think the use cases are different, whether it's bitcoin, ethereum, stable coin, and I think a stable coin is an extremely approachable way for new users.
To adopt this underlying technology.
And on that note, you know, with tokenization, and this might be too early to have this conversation. But you're seeing like black Rock tokenize a fund on the theorem blockchain, Are there like any new tax implications or maybe once again, we're not there yet. We still have to figure all this out. You have to get guidance on the irs and so forth.
No, exactly, I mean, I the number of times I've heard the real world assets being tokenized. People want to learn about these new concepts, and I that has been a hot topic that I continue to hear more and more about, and it is an area where we'll continue to need regulatory clarity and guidance because if you think
about any any of these, you know, new concepts. So let's say the tokenization of a real world asset, it we need to think about the nuances or reporting and what does the actual accounting look like for that, And those are conversations that we're actively having today. So but at the root of it, it's all about the underlying transaction data and being able to capture what is the value of this asset when I acquire it, when I sell it, and then any point in time in between.
It's the same thing with NFTs. I mean, it's it's still a challenge in the space for anyone holding n fts, what how do you how do you value what what that n f T is worth? There's there's different solutions out there. You know what the value is when you acquire that n FT, you know what it is when you sell it, but how are you measuring that time in between? And it's the same thing for for some of these other emerging concepts.
Question where wouldn't the standar Let's say I buy a trading card or a comic book. Wouldn't the same rules apply because there is volatility in that market and it's a collectible and I could be holding it for six months or one month and I flip it or whatever it is, Right, wouldn't something similar apply to or just you know, the offline version of that applied to NFTs.
Yeah, and so that's where So that's interesting because right now in this updated accounting guidance, NFTs are out of scope for this fair value accounting guidance. So right now, how what Technically? Technically, if you're holding an NFT, you are still required to do impairment on that n FT, which the implications for that are quite challenging for a company. If I, if I buy an NFT, being able to track what was the low after I acquired it, even
though I'm still holding it. That's it like if you're holding a comic book that is nearly that's virtually.
It's pretty much impossible to do.
And so that is where we we should continue to see and we will continue to see, you know, based off of demand and use cases really playing out in the industry, that guidance will also need to shift because that from an operational perspective, that becomes extremely time consuming and you know, you also want accurate reporting.
So it's the same thing.
I appreciate the analogy there because right now the guidance has NFTs scoped out. So as we see, you know, if and when and how we see more demand for these use cases. I am confident that you know, the FASB and these other regulating bodies ease will you know, find find middle ground in terms of what's required.
Because at the end of.
The day, I do believe that there is utility and value in this underlying technology and we're just scratching the surface with use cases and paired with these new use cases, and to actually encourage innovation in this space, we will need you know regulation and guidance that that makes sense and is feasible for people to continue to adopt.
So yeah, well said, I got some wrap up questions here for you. First, if you could create your own metaverse, what would the theme be?
Oh, you know, that's interesting, If I could create my own metaverse, actually am I'm really passionate about education. I love education and at some point in my life I'd love to be a teacher, and so I'd love to see a metaverse for some sort of innovated education environment.
Awesome. And then some rapid fire questions versus favorite food.
Favorite food, Oh, my word, my favorite food is a smoothie.
Favorite musician or band Diplow, favorite movie Leelee Blonde? And favorite book?
Oh, favorite book? I am Malala.
And when you're not working at tax Bit, what are you doing for fun?
I am in the mountains doing all things skiing, snowboarding, trail running, and I also am a freelance artist.
M HM, Reagan. Pleasure chatting with you. Appreciate the insights, and you know, hopefully we get additional clarity from the government, the I R S and they get get it right, you know, balance regulation and legislation. So but thank you so much for joining me.
Yeah, thank you.