Name: Balancing the Ledger: Libra Founder and CEO Jake Benson
Uploaded: 2019-01-25
Duration: 11 min 4 s
Description: Libra provides institutional-grade financial record keeping services for the crypto industry.

[ MUSIC ] Welcome to Balancing the Ledger, where finance and tech intersect. I'm Jeff Roberts. And I'm Jen Vietchner. And today, we're delighted to welcome Jake Benson, the CEO of Libra. Yeah, that's for having me, guys. Jake, you're basically the tax guy of crypto, is that right? Yeah, perhaps. I like to say the way I got started with Libra was I might have been the very first nerd in the world to actually Google search. And this was back in 2014, how do you pay your capital gains taxes on crypto? That was actually the impetus for the company. So what else does Libra do now? Yeah, so we have evolved as a software company, along with the industry. So we've started with solving for capital gains and losses for taxes. But as you guys know in 2017 there as a huge appreciation in prices. There's a ton of fun formation and there's obvious Interest from large, traditional institutions in dealing with crypto. So we've built out an institutional grade product called Libra Crypto Office. And essentially bread and butter for that software is striking NAV for fund administrators. Monitoring and calculating in near real- time, PNL, for the funds trading crypto. And then for auditors. The ability to sample these transactions, and produce auditable financial statements for crypto assets. So your clients are hedge funds? Hedge funds, fund administrators, and auditors are all buyers of the platform. We also help OTC desk, circus one of our larger client. We also help with exchanges and just generally, this thing we call Crypto enterprises which do a lot of things in crypto whether bin landing Or trading, or index funds, or banking, Galaxy is a great example of that and one of our premier customers, yeah. So you're almost like the turbo tax or crypto but for like the hedgefund set. Yeah, that's a decent analogy. Sure The IRS hasn't really filled in some of the blanks, both for individuals and institutions, right? In terms of pricing it and all the rest of it. Yeah, the last official guidance that they issued was back in 2014, it's called 2014- 21. Essentially what that did was give the basic advice that Crypto is a capital asset and so therefore, short term gains and losses, long term gains and losses apply just like any other equity. But since then there's a lot of nuances, there's a lot of specific scenarios that haven't been solved for yet and that requires guidance from From the IRS. Quick example is 1099- B, if you trade stocks, you are expecting from your broker or your platform like e- trade or scott trade to receive that 1099- B, you put that on your schedule D, your accountant takes care of it, there's no headache. In the crypto world, it's not explicitly stated that a 1099- B is required from your exchanger broker, so the burden is left upon the fund, or the individual that's trading to track cost basis, and this is extremely challenging. So there's a tax- specific issue that the IRS really needs to give guidance on. Before there's a best practice or a standard way of doing things. Some customers track their cost basis, some rely on proceeds and it's really [ INAUDIBLE ] scenario despite that. Yeah cuz in a given day I mean bitcoin can swing thousands of dollars and so what your [ INAUDIBLE ] point you picked to declare you sold it but also is it first in first out? Is this without a You know, assets and inventory. So, on those few things, specifically, that's another thing that the IRS hasn't really specified yet. Is what methodology do you use? Generally speaking, the IRS came out with guidance, not crypto specific, that FIFO is a method that you should be using, so that's the way the industry is For him to try to implement fifo, but we have many customers that have had the desire to get optimized with their positions and actually minimize their taxable gains, it doesn't affect their actual P and L at the end of the day. But there's that obvious motivation to reduce your taxable gain or loss in a particular year. You also just announced a special new software certification, tell us a little bit about that. Yeah, thanks we're really excited about SOC credential and specially SOC 1 Type 2 is the credential that we received. SOC stands for Service Organizational Control. What it is essentially proves is that CFOs, controllers, the accounting department. Can rely on our software to produce trustworthy information. And that's important because this is actually table stakes for large financial institutions. They won't buy or adopt software that doesn't have sock credentials. But now enter the crypto world where almost everything is new Nobody has gotten a stock certification yet for record keeping in Crypto. So there has been Excel Spreadsheets, there has been homegrown software to actually do the tracking. Now that we have the [ UNKNOWN ] credential, it not only gives our current customers additional assurance. The numbers we produce and calculate and process are accurate. But it also allows for traditional financial institutions as they plan on being able to serve this new asset class and plan for the future of tokenization of everything and get their hands on this technology. it gives them a solutions that they can actually rely upon. That their board can say, all right, check the box, SOC certified. And we have this now. So, this might bring some people off the sidelines, who otherwise wouldn't get involved in the absence? I truly believe this, yeah. I truly believe this will help. This is part of a bigger story we're hearing about cuz it's sort of funny. In one hand, The headline to the crypto is in big decline. But meanwhile behind the scenes it seems that a lot of the infrastructure is being built and people are coming in to invest even in the bear market. Yeah, so the infrastructure built out will be slow and steady. The markets are gonna swing up and down. We've seen this before in crypto. So in light of the fact that there's a lot of, Entities out there, they're hurting from the current prices. We are crossing milestones month by month. One of the milestones, I think, was the fact that trust- chartered companies now can issue stable coins. You guys had the [ UNKNOWN ] twins on the show. They have a trust charter stablecoin that's only a few months old. Real estate tokens that have been issued are only a few months old. Under a properly regulated environment it's obviously been an idea for a long time, but we've done these things in a truly industrial- grade, enterprise- grade way that's ready for Wall Street. And then Self servingly, but I think SOCKS certified software that provides a record keeping for this brand new asset class is just as important. Speaking of this whole new asset class and milestones, one thing that people have been watching very closely is whether we'll get a BitCoin ETF. And just this week, the one application that everyone has been watching is Van Eck ETF was withdrawn and part of it is the government shutdown playing a role. But what are you thinking and what will it take to get something like this approved? With ETFs I can only assume that there are issues and hurdles that are just impossible to overcome in the current state of things. I don't think that there's a natural resistance for the regulators To approve an ETF, I think there's probably infrastructural problems that prevent it. I don't know what those exactly are, but yeah. So you think probably it won't be this year, it'll be 2020 at the earliest You post in ETF? I wouldn't be one to predict but perhaps these things d take a long time and the fact that it is taking a long time is actually testament to how hard it really is, you know to solve for all these infrastructural things. Yeah, if I'm not mistaken, one of the things that SEC has cited previously when rejecting these applications is just how do you audit something, how do you calculate the NAV That's something that still has yet to be solved, do you think? Well, we have the solution, so I think it is currently being solved. So are you saying you could provide the necessary software to get a BitCoin ETF approved? Solve for a piece of puzzle, we're not solving every piece of the infrastructural issues. On a added billy side on evaluation side yes that is what we focus on. You mention you have a lot of instutiotional clients these hedge funds and various financial instuttions, but are we all seeing potential other entrants into the crytpo business? Yeah absolutely. And this is where I kind of get truly excited because there's a brand new realm. So I believe and maybe you've heard some rumors that Facebook might issue a currency. But if you look at the FANG stocks. Facebook, Amazon, Netflix, Google. I truly believe that they're all ging to be able to create their own currencies one day, and why wouldn't they? It's, in order of magnitude, more powerful than just a gift card. So assuming that large corporations, Corporations can issue their own currencies. Let's take that leap, that's a grand assumption, but nonetheless that might be the future. In that case, there's entirely new accounting challenges that will exist as these currencies cross borders as this value transfers in ways that we really haven't seen before. Across users that usually didn't interact with each other from a financial perspective. If companies that traditionally had banking services, I mean Facebook probably it doesn't have experience, They don't. Yeah. The don't. But why wouldn't they at a certain point? If we go to Korea and look at Kakao, which is a very popular messaging platform there. They have banking and value transfer built in. You look at Facebook, they have their own messenger platform- Whatsapp. Yeah, and why don't they have highly integrated payment platforms? And what's exciting thing about is maybe it's not just a standard value transfer of your Your Fiat currency in a country. What if it's a new type of currency? So it's provocative thought. Yeah absolutely. Jake before we wrap up, I'd like to ask Ezra on behalf of a lot of our viewers who are just individual investors. I know Libra started out with software for individuals, now enterprise. What should they do? I mean your product right now For the hedge fund set but what should the average person do who has some crypto transactions, how should they go about it? That's actually a challenge in and of itself. So, you know you have companies like H & R Block, TurboTax but the. [ CROSSTALK ] For the individual tax solution I don't think those guys are ready yet for the influx of crypto holders that will come knocking on the door. I think we have a solution that can help, though. Thanks so much for coming by, Jake. Yep, sure. Thank you guys. I'm Jeff Roberts. And I'm Jane Vachna and for more of balancing the ledger, go to fortune. com. See you next time. [ MUSIC ]

Balancing the Ledger: Libra Founder and CEO Jake Benson

Finance

Libra provides institutional-grade financial record keeping services for the crypto industry.