- It is almost impossible for the finance field to not get impacted by blockchain.
- Like most chartered accountants (CA), Varun Jajoo also thought that ‘crypto is a scam’.
- But when he understood the utility and the technology behind crypto everything started making sense.
- Though crypto is still in its nascent stage, Varun decided to build DeFi Tax Calc, a platform to make crypto compliance easier.
The ambition to achieve more
Growing up I saw my father set up his tax practice, hence the inspiration to become a chartered accountant actually comes from my dad.
The day I became a CA, a job opportunity came from PwC, a Big 4 firm. I decided to get a bit of corporate exposure, and thus joined PwC’s Tax Advisory services.
However, a couple of years later, I wanted to start something of my own, work with smaller businesses, and have a bit more hands-on experience.
I ultimately followed my father’s footsteps and, yes, you’ve guessed it, I started my tax practice in India. My tax practice was going well in Mumbai, there’s no doubt. But I needed to get out of my comfort zone.
I didn’t want to be stuck in an outdated work-life structure in Bombay. My wife and I, both were keen on pursuing opportunities outside of India.
We knew that we were taking a massive risk, given both my wife and I had secure jobs. But I had a backup plan.
If the ‘Australia plan’ doesn’t work out, I could always come back and join my dad’s tax practice.
In 2018 we immigrated to Sydney, Australia, and started with KPMG, another Big 4 firm.
Learning about crypto and DeFi – the future of finance
My experience at KPMG was certainly going well. I joined them as a consultant for Advisory & Compliance services.
The work-life balance there was also something one could wish for.
After working there for almost 2 years, I had the urge to explore the different opportunities Australia had to offer.
I don’t know why but my heart said, “ Let me now understand how local businesses work.”
With that said I moved to a smaller tax accounting firm, to get more hands-on experience.
Over there, I had a client who created a super fund for investing clients’ money in crypto. And when you are handling your client’s accounts, understanding their business, becomes mandatory.
There is a popular notion that chartered accountants are a bit too skeptical about crypto. I was no different. I also thought that ‘cryptos are too volatile. It’s a scam.’
But when I spoke to that client I realized they are smart and know what they’re doing.
The more I looked into crypto, the more I understood how DeFi or Decentralised Finance can be a game changer.
In Decentralised Finance, any sort of transaction happens on the blockchain. For instance, if you want to send money to your friend in any corner of the world, it goes through without a middleman, (for example, banks).
There are millions of computers across the world where transactions are verified.
After learning a bit more about them I even started cryptocurrency trading to understand the process.
Taking the risk of building a startup in the crypto space
When I started crypto trading, I had more than a thousand transactions in the first year only.
Then I wondered, “Reconciling all of this for the year-end would be an absolute disaster.”
That’s when it occurred to me, “What if there was software that could make crypto compliance easier?”
I did think about it for quite a bit but was worried that this would be too risky. Plus building something for the public is always an added stress.
However the more I spoke to people in the crypto domain, and attended Web 3 events, I realized that this was my chance to try out something which hasn’t been done before.
Most people thought that Web 2 or ‘the internet’ was of no use. But look at all the people who have made an empire on the internet.
My wife has been extremely supportive. Her knowledge of transfer pricing helped a lot.
Now, what about the tech part of it?
I was a non-tech person so now I needed to find someone who could fill in the gap.
Thankfully a close friend of mine is a software developer and a data scientist. He had sold off his startup to a US-based company and was thinking about picking up a new challenge as well.
After sharing our plans with each other, we brainstormed for about four to five months.
We discussed the logic behind crypto, tried to understand the technology behind it, and questioned whether we could possibly achieve this.
And in 8-10 months we built the product from scratch.
It is a SaaS product where you pay an annual subscription fee.
We have not officially launched it in the market, but we are going to, soon.
How DeFi Tax Calc is making crypto compliance easier
Every time you buy or sell Bitcoin on an exchange, (just like shares) the reports are generated in a different format.
In share trading, you generally get a year-end trade summary stating, ‘This was your interest income, or this was your capital gains.’
But none of that happens in crypto trading, as the reporting standards have not been generalized across the globe, yet.
The income tax authorities need a standardized report.
As much as people hate the term compliance, at the end of the day, you don’t want the government interfering in what you do, right?
That’s where DeFi Tax Calc comes in.
We act, I wouldn’t say as tax accountants, but more like tax intermediaries.
And all we want to do is make crypto compliance easier.
All the transactions that you’ve done on any crypto platform will get uploaded to the platform and the software will run through all the transactions.
It’ll then give you a transaction summary, which you get to review. And once you approve of it, we calculate the capital gains and interest income, and you’ll then get your year-end tax summary report.
We reconcile based on the transaction hash/hash ID, (every transaction that is added to the blockchain gets the ID).
Let’s say you are transferring Bitcoin from wallet X to wallet R, you’ll get a common transaction ID.
We will review and see whether there are any tax implications.
We then create a report that an accountant can easily understand.
The best source to learn about cryptocurrency
There is no one source for learning about crypto.
I personally learned a lot after investing a few dollars, in random crypto coins. I tried to understand the use case of the coin.
I know a lot of people say crypto is a scam, unfortunately, 99% of it is true. It is similar to when thousands of companies were created before the dot-com bubble.
99.9% of them evaporated two years later, but companies like Apple and Amazon really changed the way we look at the world.
So to understand it firsthand you need to have some skin in the game, which obviously is easier said than done.
Create a wallet, and transact in Ethereum. And the most effective of them all, start talking to people who are experts in this field.
LinkedIn is a good platform but people mostly distribute advanced-level crypto knowledge.
I would highly suggest that you don’t pay for fancy courses, which promise that you’ll be learning X, Y, and Z about blockchain or crypto. Most of them are outdated.
To understand the basics of it you need to join the communities where people talk in a similar language as you do.
There is a lot of content on Reddit and Twitter. That is where most of the people who are into Web3, generally hang out. Go to Ethereum’s website, you will find their white paper, which will give you an in-depth understanding of the blockchain.
Why Financial Professionals should care about crypto
Yes, generally the crypto space is massively risky. But I would say it is almost impossible for the finance field to not get impacted by blockchain.
If you look at the areas of accounting, auditing, insurance, and financial services, pretty much all of them will come across blockchain-related transactions.
Lately, a lot of people are saying that accounting is getting automated, auditing is getting automated, and we’ll lose our jobs.
I don’t think accountants or auditors, will lose their jobs, rather the nature of jobs is going to change. The way of doing audits will change.
Companies like IBM use blockchain for their day-to-day transactions. Coca-Cola is building an NFT use case and so on.
So if you are an accountant or an auditor you’ll need to understand how blockchain works, and what a smart contract is before you can get jobs in this industry.
There is undoubtedly a lot of scope in the market.
As per the recent study report by Vantage Market Research the Global Web 3.0, Blockchain Market revenue is expected to reach a value of USD 23.3 Billion in the year 2028.
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