As digital assets became more widely accepted and institutional, the need for corresponding tooling to meet accounting, reporting and tax requirements of both individuals and corporate users grew. Initially operating largely out of sight, tax authorities across the globe noted the surging value of digital assets and the increasing number of retail and institutional players within new digital asset markets. In some cases, national tax authorities established the tax treatment of different types of digital assets well in advance of the adoption surge, while other nations lacked – or even still lack – clear rules and regulations on both the underlying blockchain-based digital assets and the tax treatment thereof.

In most jurisdictions, authorities assert their right to tax digital asset proceeds and financial events: at times in accordance with and analogously to non-digital assets, in other cases as distinct asset classes without nondigital equivalents. Following a long period in which cryptocurrency traders and participants in the larger ecosystem were largely left to their own devices, tax authorities now apply increasingly elevated levels of scrutiny and enforcement action.

In response, consumers and enterprises seek the means to both reactively and proactively ensure compliance with tax regimes. In many cases, tax reporting requirements coincide with the need for enterprise-scale accounting and reporting solutions. The challenge of delivering these is amplified where decentralized finance (DeFi) applications and services result in a series of transactions or otherwise taxable events, irrespective of or in addition to purchase and sale of underlying assets.

Recent market turbulence as the consequence of FTX’s failure further underlines and incentivizes the need for appropriate accounting tools and procedures, whether for risk management, reporting purposes, or tax loss harvesting.