Accounting for crypto in the UK with Joe David from Myna and Nephos
After finding success with his traditional accounting firm Nephos, Joe David founded crypto-specific accounting firm Myna in 2021.
The UK follows much of the Western world in its treatment of crypto as an asset rather than a currency. Myna helps clients navigate these tax and accounting implications.
No all-inclusive accounting software for crypto transactions currently exists. Myna excels at putting all the regulatory pieces together for its clients.
Sometimes the greatest innovations are born out of stagnation. For accounting firm founder Joe David, the doldrums of 2020 gave him the chance to step back and get versed in an up-and-coming skillset: cryptocurrency accounting.
“In 2020, we're all thinking, ‘What can we do with our lives now that we can't leave our houses?’ I got into researching crypto: YouTube videos, articles, and all those bits and pieces. I just was like, ‘This is me all over.’ Everything about it felt like me.”
Joe’s newfound interest led him to create Myna, a UK-based accounting firm that focuses solely on cryptocurrency. It allows Joe the creative freedom to work in the exciting and ever-shifting field of crypto while staying grounded with the conventional accounting work of Nephos.
“Nephos has been going for about eight and a half years—so the traditional accounting firm has been going for a while. … [I wondered] ‘How do we scale?’ That's where crypto came into it.”
On episode 28 of the Accounting Leaders Podcast, Joe and Karbon CEO Stuart McLeod walk through the UK’s involvement with crypto, its tax implications, the crypto accounting tech stack, the metaverse, and what the future holds for Joe’s Nephos and Myna.
Ditching the spreadsheets
When Joe founded Nephos in 2014, his goal was to bring his clients’ accounting into the 21st century by relying more on software rather than spreadsheets to get the job done. In building out Myna in 2021, it was easy to apply the same principles. In fact, because of cryptocurrency’s complexity, using software was a necessity.
“If you're a basic retail share trader, you're going to use a couple of platforms at most. [But with] crypto, you've got to use about 15 if you want to cover every kind of base that people want to cover. Trying to manage all that through spreadsheets is a nightmare. Software is the focus of everything we do.”
In traditional accounting, some banks only work with certain software. For instance, a given bank may function only with Xero, or only with QuickBooks. The same applies to crypto accounting. So what does that tech stack look like?
Joe describes Myna’s crypto-specific stack as using Xero as its base, with a mix of Accointing, Koinly, Crypto Tax Calculator, and Cryptio, in addition to Karbon. Though this may sound cumbersome, Joe finds that many tech companies are competing to create more all-encompassing products.
“Everybody is fighting for a new market, rather than an existing market. If they want to be number one, what might have been number one six months ago might not be number one today, because of the way the market evolves,” Joe explains to Stuart on the podcast.
Using blockchain for accountability
Cryptocurrency has a naturally built-in transparency tool: blockchain.
Because the record is public, it enables accountability across organizations. Joe expresses support for the use of DAO, or decentralized autonomous organizations, which are in essence, collective investment groups.
“You can see the whole DAO’s balance sheet on the blockchain because effectively, that's all it is. We talked about transparency for companies and transparency for projects. There's no better transparency than an open public ledger that allows you to have a look and make sure everything's legitimate,” Joe posits.
The UK vs. the world
Though Myna tries to push boundaries with crypto, the UK doesn’t fully support such innovation—yet. Currently, most Western companies treat crypto as an asset rather than as a currency, which also applies to how crypto transactions are taxed.
Whether it’s bought or sold, cryptocurrency is treated as a capital gain or capital gains liability. Joe elaborates on the prohibitive nature of the UK’s attitude toward crypto, where some opportunities are lost to countries that have more flexible regulations.
“Every time we see a little bit of a real kind of push forward in the industry and in innovation, we seem to have a roadblock. Recently that roadblock was some new tax guidance in the UK around ‘defi’ or decentralized finance. It's been quite prohibitive. We're talking about the innovation projects that we're looking at doing. … I think the UK needs to understand what it wants and where it has to be within that space.”
Despite the government’s hesitant attitude, Brits are still eager to get involved with crypto, as Joe continues to see plenty of new entrants to the market.
Fortunately for them, Myna is poised to guide new clients through the murky world of crypto accounting. Joe keeps tabs on regulations in the UK, working with lobbying groups to align policy with citizens’ desires.
It is getting there, but at the moment, it does seem [like] a huge disconnect between what the authorities and the government think and what the actual people on the ground think and the people that are actually creating the innovation.
Recommended reading: Solving the tax and cryptocurrency conundrum
The metaverse
Though he’s not much of a gamer, Joe still sees great potential for what’s to come with the metaverse. For starters, he’s enjoyed work meetings in the metaverse, particularly being able to interact with his remote colleagues in a new way.
“From a business perspective, there's some real opportunities. Zoom is great, and [Microsoft] Teams is great. They do what they need to do, but none of them do what the metaverse and what VR can do.”
Joe recounts how he and a remote colleague met in the metaverse using their Oculus headsets. “You actually get to kind of see people moving and interacting, and it just felt like a really interesting space,” he remarks. “I do really think one of the really exciting spaces for blockchain and crypto is to hone in on that.”
Cryptocurrency is the tender of choice for purchases within the metaverse. However, each platform uses a different variety—a market that will likely continue to grow and shift as the metaverse is further developed.
The road ahead for Myna and Nephos
When Stuart asks Joe what he sees in the future for Nephos and Myna, Joe’s quick to answer: “World domination.”
In a more serious answer, Joe hopes to make Myna the number one crypto accounting firm in the UK, and then extend its reach to a more global market. Rather than becoming a tax specialist in each country it reaches, Myna would hire consultants on the ground to collaborate on tax issues.
As for Nephos, Joe plans to continue adding services to benefit its clients, looking to wealth management and mortgages as opportunities for growth.
One thing’s certain: with businesses in both traditional accounting and cryptocurrency accounting, Joe is sure to continue finding success.