Cryptiony, a crypto tax automation platform for individuals, traders and tax professionals, has closed a €500k pre-seed financing round led by ff Venture Capital of New York with participation by Pointer.Capital and Marcin Wenus, a web3-focused angel.
Bootstrapped until now, the new funding will enable Cryptiony to launch into the UK - the largest crypto market in Europe - with a subscription model that gives it a strong price advantage over competitors. Cryptiony is also expanding its development team to introduce new features, and new exchange and blockchain integrations. The startup has already achieved leadership in Poland, with a tenfold increase in subscriber numbers in 2022. It is aiming for European leadership by the end of 2025.
Crypto tax reporting is widely misunderstood, unnecessarily difficult and there are not enough accountants who are up to date with today’s legal requirements. Many people are simply unaware of their responsibility to include crypto assets and their returns and exchanges do not provide annual tax statements. However, with tax authorities such as the IRS in the US and HMRC in the UK starting to put pressure on crypto asset holders, awareness is growing of the need to file crypto gains, losses and staking payments as part of annual tax reporting. In the UK, exchanges have to notify HMRC when an individual’s total holdings reach a relatively modest £3,000 and even exchanging one type of crypto asset for another or for goods incurs tax liabilities. And in December, the European Union proposed new rules that will require all digital asset service providers to report transactions involving customers residing in the bloc. Right now, reporting can work to taxpayers’ advantage. With most crypto assets heavily down in value since the end of 2021, it is likely that many purchasers have losses that, if recognised and reported, could offset future CGT.
Cryptiony aims to make cryptocurrency tax calculation easy, fast and affordable for beginners, professional traders and accountants. It automates crypto tax calculations by linking directly to exchanges via APIs and extracting relevant data, which it uses to instantly create a full tax liability report compliant with complex tax laws, such as the UK’s share pooling rules. Even relatively small investors may need to report considerably more data than with conventional assets because of the nature of staking - a form of interest paid on crypto assets. Staking payments are often made daily, creating hundreds of data points for each asset.
Bartosz Milczarek, co-founder and CEO at Cryptiony, says: “If crypto ever was part of a separate universe, it isn’t now. Tax authorities are treating trading profits just like any other capital gain and taxpayers are waking up to the risks of non-compliance. It’s a big market already and, as web3 becomes mainstream, is going to get even bigger. The UK is our most important opportunity right now and the new pre-seed funding enables us to grab that opening with a pricing model that is going to be hard to ignore.”
Many crypto users are operating on multiple exchanges and blockchains, making tracking all assets and historical transactions complicated. Even automated solutions can struggle to check the wide range of markets on crypto exchanges - well over 1,500 in the case of Binance. Cryptiony has optimised its cloud infrastructure and networking routing to reduce data synchronisation to one or two seconds for most exchanges and under two minutes for Binance, compared with 15-30 minutes for other tools. It also boasts fewer data gaps than most of its direct competitors, which rely on bug-prone open-source solutions to integrate with exchanges.
Cryptiony was co-founded in 2021 in Łódź, Poland by Bartosz Milczarek (CEO) and Hanna Milczarek (CMO), and then by Krzysztof Dworakowski (CTO). Bartosz and Krzysztof both bring more than 10 years’ experience developing IT systems for banks, forex brokers and the blockchain industry, complemented by Hanna’s accounting and finance expertise. It opened a new London office in 2022, which Cryptiony expects to become its most important market and a launchpad for the rest of Europe.
Mariusz Adamski, Partner at ff Venture Capital, comments: “The number of global crypto and digital asset users recently passed 320 million according to Binance. Eventually this number will reach billions. Each one of those users has to start reporting their tax liabilities, making an extraordinary market opportunity for Cryptiony’s automation tool. Early leadership is important in fast-growth markets and this pre-seed round gives Cryptiony the means to build a strong position in Europe first.”