SPECIAL EDITION: On The Brink With Castle Island

In this special edition of Cryptonomix, Mark Eckerle joins the On The Brink Podcast with Matt Walsh to discuss Mark’s digital asset and blockchain background and Withum’s journey into the digital asset space. They also address the emergence of stablecoins and their effects on corporate accounting and operations, as well as how startups should evaluate tax, audit, and advisory services with regard to digital assets.

Transcript

Speaker 1 0:00

Hello listeners, welcome to this episode of Cryptonomics. Before we jump into today's discussion, please keep in mind this recording is for general education and is not intended to constitute investment advice. Any opinions expressed are those of the participants and do not necessarily represent those of with .

Speaker 2 0:15

Hello everyone and welcome back to a special episode of Cryptos. This episode is a rebroadcast where I appeared on the on the Brief podcast hosted by Matt Walsh. Matt is a good friend of mine who I've known for years and is the founding partner at Island Ventures . It was great sitting down with him and talking about the intersection of accounting and digital assets and the importance of finding the right advisor for your business. We discussed how critical it is of finding the right crypto accountants, the founders of early stage companies, and some of the challenges that companies can face. This episode also highlights some of the success stories Rhythm has had in the crypto space and the extensive experience our team offers across all service lines , advisory, audit, and tax. I hope you enjoy this episode as much as I did and look forward to catching you on the next episode of cryptonomics.

Speaker 3 1:06

Today on the podcast I sat down with Mark Eckley , a partner at withum . Withum is one of the top accounting tax and advisory firms in the country, and they have a dedicated digital asset practice that has been assisting companies of all shapes and sizes with their blockchain specific needs. Mark and the with team have been a huge help to a number of our companies at Castle Island over the years, and you've probably heard their name as a sponsor on the Friday roundup shows. I was excited to have Mark on the show to talk about his views on the evolution of the industry and some of the hot button topics that Ham's customers are dealing with in today's environment. So without further ado, here's my conversation with Mark at Ham.

Speaker 4 1:42

Matt Walsh and Nick Carter are partners at Castle Island Ventures. All of these expressed by them or the guests on this podcast are solely their opinions and do not reflect the opinions of Castle Island Ventures. Guests and host may maintain positions in the assets discussed in this podcast. You should not treat any opinion expressed by anyone on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of their personal opinion. This podcast is for informational purposes only,

Speaker 5 2:03

Brought down by bad mortgage investments. Lehman, which has 25,000 employees, will be liquidated.

Speaker 6 2:08

The federal government loans , American International Group, a IG $85 billion. This is a different kind of market and the Fed is

Speaker 7 2:16

Asleep . The federal government is stepping it to stabilize Fannie Mae and Freddie Mac , the two mortgage giants that have been threatened by the housing crisis. The Bank

Speaker 8 2:23

Of England has pumped 75 billion pounds more into Britain's ailing economy with the new round of Tive

Speaker 9 2:28

Easing in print , a couple trillion dollars and all of a sudden people start to worry. So out of this worry, we have something called the Bitcoin Bitcoin

Speaker 3 2:36

Mark . Well , thanks so much for joining us today on the podcast. Thanks,

Speaker 1 2:39

Matt . Appreciate you having me.

Speaker 3 2:40

Excited to talk about rhythm . You guys have been really, really deep in the digital asset blockchain space for a long time. So maybe for those who are not familiar, tell us a little bit about the company and what you guys are up to.

Speaker 1 2:51

Yeah, and again, appreciate you having me on. So with them , we are what we label a full service accounting firm. So we offer the big three. We kind of have it in our name tag. It's audit advisory tax. I think audit kind of speaks for itself tax as well. But under that advisory umbrella, we really have a whole host of services that we do offer. Things like ERP implementations, if you're looking at chain softwares, transaction advisory services, forensics and valuation audit support, as well as your basic bookkeeping, which we label R Oasis group . So outsourced accounting systems and services practice. Another thing that we also offer that you wouldn't really think of from an accounting firm is cyber security solutions. So we do managed it, incident response, digital forensics and things like that all in . We are about 2,700 employees. We have 26 offices primarily up and down the east and west coast of the United States. All the way from Boston to Orlando, all the way from Seattle to San Diego. So widespread reach here in the United States with a a large presidents and we're looking to continue that growth in the Midwest as well.

Speaker 3 3:55

And you guys have been at it in the crypto blockchain space for a long, long time. How did that come to pass?

Speaker 1 4:00

I'll quickly start at the beginning of my journey 'cause that kind of segues perfectly into how with's practice grew as a whole. I first got exposure to Bitcoin, I'll say back in 2014 for my brother-in-law. So I kind of credit my entire professional career to him because he was talking about Bitcoin and it's going to be the next currency, global currency, and everyone in our family thought he was nuts. But about a year later at the firm I was at, my previous accounting firm, they had a client come to us and it was a Bitcoin client and no one knew how to audit Bitcoin. The partner at that time came out to the bullpen and just said, has anyone heard of Bitcoin? Anyone know what a Bitcoin is? So I raised my hands . Ever since then, my career has pretty much blossomed with digital assets supporting me ever since. Obviously with the market as a tailwind has certainly helped that initiative as well. But in 2018 when I was looking for potential career opportunities just to see what was out in the marketplace, I came across the headline that with had just launched their digital asset practice and there was no one really spearheading our group at the time. It really lived as a sub-sector under our technology group. So the partner leading our technology group, Krista Mayo, was kind of the only one that really had any experience with digital assets . So I interviewed with him and when I joined it was to really lead that practice. We had three, maybe four clients. So the goal was really grow the practice, lead the group, be entrepreneurial, take it wherever you want. That's the kind of spirit I had. So I had the resources to really hit the ground running, go to the market, really show the industry that rhythm was in this space, bring my three years of experience at that time, which there really weren't many accounting firms in the space back in 2018 and still to this day, that kind of range true, unfortunately really helped build our market in the group. We have newsletters that we send out, internal resources. I host a podcast called Cryptonomics. So really just trying to build our brand in this space. We make sure we have boots on the ground at all the major conferences. But a couple of the things that we had at the time that really helped grow us and our brand were back in 2018. Still to this day there's a little bit of limited regulation, but we were working with the New York Department of Financial Services at the time and working through the first stablecoin attestation. We really pride ourselves on that release back in 2018 and how far we've come today as a market. Previously at that time, the only reporting was by the token issuers. So there was no independent firm coming in and really attesting to the reserves that are supporting the underlying token. We were pride ourselves on that release back in September, 2018. And then another thing that we helped work through was the first SEC approved ICO. So we're the auditor note for working with Blockstack back in 20 18, 20 19. The years are starting to blur at this point, but at that time, every company was doing an ICO and issuing a token for a variety of reasons and purposes and all having different types of utility. So it was neat working with the other side of the table and working with the SEC and what did they want for this token report and this release to make sure that we were fully compliant. We really hang our hat on those two things being first to market and we're really prideful that our group is really blossomed with that at our backs.

Speaker 3 7:12

It sounds like you have to thank your brother-in-Law to some degree. This is a very valuable brother-in-Law. You have <laugh> .

Speaker 1 7:18

I would not be here if it was not for him. I definitely owe him a beer or two.

Speaker 3 7:21

It's funny when you were telling that story, I remember the exact conference room I was in at Fidelity when someone in 2014 said, does anyone know anything about Bitcoin? It's remarkable that just being in the right place at the right time and being passionate about Bitcoin and entrepreneurial, it's really how a lot of people got started in this industry.

Speaker 1 7:37

Just raising your hand for a new opportunity. If I hadn't spoken up at that time, I don't know where I would be and I could tell you I would not be nearly as happy or successful.

Speaker 3 7:46

Glad you're in that spot. Maybe just backing up a little bit and taking this from the direction of a startup. So we're investing in pre-seed and seed stage startups. I would say generally speaking, a lot of technologists that maybe don't have a lot of experience in tax and accounting. How are you guys engaging with the earliest stage companies once that money goes in from the venture capital side of the industry? What do entrepreneurs need to be thinking about out of the gate?

Speaker 1 8:10

That's, I would say, almost our sweet spot technology here at Woodham is our second largest industry that we service and we offer a whole host of services and it really runs the gamut on what type of companies we work with. We work with startups, pre-seed series seed , maybe that haven't even done a efforts financing and they just have maybe a debt facility on the books, raise the million dollars through a safe note all the way to mature series B, series C to companies that are already public today. The one thing we pride ourselves on is we are flexible and nimble. We grow as you grow. Working with a startup is completely different than working with a company that is series B has a full finance and accounting team already built out, and we can apply those resources as needed. I would say our first way to assist is both like you mentioned on the accounting and on the tax front because no matter when your company started, no matter how many employees you have, you still have to file annual corporate tax returns. So we assist with that and the one specialty that you're getting from Withum is we are your resource. We are your advisors. We know what's applicable to your business and what's not, where you can have tax savings, tax strategies. We can loop in any of our specialists from sales tax RD tax credits if you need any valuation assistance, if you're issuing a token or a business valuation. So we have all those specialists that can assist and be parachute in to your business as needed. So you always have a go-to person to assist. But I think from a startups perspective and from where we can assist founders, it would be on that day-to-day bookkeeping, right? So you don't wanna be bogged down with the day-to-day record keeping . It's certainly cost effective to outsource that, whether it's to with them or to another firm. As you're looking to build operations, focus on building strategy and really growing the business, you definitely don't want to put the accounting by the wayside, but you shouldn't be focusing on that as your day to day . There's certainly other more important things to keep in mind. The best part about working with Withum is we don't nickel and dime any of our clients. My cell phone , as you've seen Matt, is right in the My signature tag. So call me, text me. I'm always here to answer your any questions for any clients that we work with or I can point you in the direction as to who can get that answer for you. So we're always here to be advisor and to help our businesses grow, our clients grow and scale up as they scale up.

Speaker 3 10:25

And I guess in the blockchain space you have startups that start off with just traditional needs around tax and accounting, bookkeeping and whatnot. And then where it starts to maybe get more complicated for a lot of companies is you have a customer that wants to pay you in something other than dollars, cryptocurrency. So maybe talk about some of those challenges and where you're , you're engaging with customers as they initially go down this crypto rabbit hole.

Speaker 1 10:49

It's funny, we actually had, I think this is going on four or five years ago, a prospect at the time came to us and said, we wanna work with you, but we don't want to deplete our Ethereum balance. Can we pay you an Ethereum? So immediately we start engaging firms who can assist us in accepting 'cause I would say we're not in the business of holding digital assets with 'em , but by all means, why can't we accept it and just convert it? I am proud to say with 'EM does accept digital assets if anyone wants to pay us in that. It was an interesting time because talking to a lot of folks here at the firm, they were like, why do we want to accept this? What's going on <laugh> ? I'm like, we're not holding it. Let's take a step back. We're just accepting it. Still open the door for new business, which is the same way I talk to our clients today. When you think of traditional technology clients, a vendor might come to them and say, Hey, can you pay me in stable coins if they're international because of the flexibility that it offers, the real time settlement, faster transactions, low transaction fees. I'm seeing a lot of those situations for companies that don't have any crypto components of their business, just traditional tech for one reason or another, and they come to with them , they say, Hey, how do I approach this? That's kind of where we go back to the crypto 1 0 1, here's how you get a wallet, here's how you can check balances on chain . Here's how you can verify security controls and make sure you have the right internal controls at your department of who has access, who can approve transactions, et cetera. But I mean, when we're thinking of how do you accept crypto? I mean there's certain controls you wanna have in place. Like I mentioned, you wanna find the right platform that's right for you, whether that's using a third party custodian or that's using some type of cold storage, cold wallet, whatever you're comfortable with and making sure you have the right controls in place. That's wearing my auditor hat where I'm coming into play here. But it's important to know when you're getting into this new space, it's very different than the traditional banking system. So it's very easy to become susceptible to sending a transaction to the wrong wallet address. You can't get that money back unfortunately. So it's very different. And another thing is making sure you understand what doors you need to open for, what crypto you want to accept or what crypto you want to pay vendors. I think a lot of the times the first foray is in stable coins. It's the easiest to denominate, think it's the easiest to transact with. And it's easiest when you think of the accounting or tax implications because when you start opening the door for digital assets, you gotta also keep in mind there's certain hurdles when it comes to bookkeeping as well as your tax reporting. So thinking of which digital assets you want to transact with, understanding what platforms offer that capability. And obviously many of the softwares, many of the exchanges offer the major cryptocurrency. So it's really not that hard to find one that fits the right bill there. And I say all of that with the caveat where a lot of this can be helped and the pain points can be suppressed through the right softwares. And that's another thing where you have to think about what's right for your business because I don't think there is to this day one software that's the best by far. When you think of what's tracking and accounting for digital assets, I think each one offers its own variety and its own best case. And each one has its own inherent challenges. So you gotta find which one that fits your business and how you're looking to utilize digital assets. It's an interesting time 'cause there's a lot of non crypto companies just looking to get into the space because of vendors asking for it.

Speaker 3 14:16

Look, if you have a customer that's going to pay you a big ticket and they're only willing to send it to you in Bitcoin, Ethereum or stable coins, I think you're gonna figure out how to do it.

Speaker 1 14:25

Yeah, you're not gonna say no to that.

Speaker 3 14:26

The other interesting thing is obviously a lot of companies maybe got into the crypto space by accepting payments, but now you're starting to actually see publicly traded companies put it on the balance sheet, which has been an interesting trend. Any views on that and whether or not that's something that we'll see continue here at scale?

Speaker 1 14:42

I think yes, I think we'll continue to see more and more companies put it onto the balance sheet. And I think one of the hesitancy previously was the lack of clarity around accounting reporting and tax reporting. And I think we're starting to see with the new guidance that came out last December, the new a SU standard, we're now gonna be able to fair value digital assets on the balance sheet. I think that's gonna help paint a better picture as to the financial position of companies. So the previous guidance where you have impairment and tangible assets, your marking is down the balance sheet didn't really give a good insight as to the position of the company and where it stands today. So I think with this new standard, I think more and more companies are gonna be enticed to maybe put some potential treasury into Bitcoin. And I think this parlays directly with the approvals of the ETFs. I think that is gonna open a couple businesses minds up to this opportunity whether they're holding it themselves or they're investing it in like an ETF , this is my personal opinion, but I think Bitcoin and crypto is here to stay. So it's just a matter of time before we get to that point. Before more and more companies decide to have it as an alternative asset on their balance sheet.

Speaker 3 15:47

It's gotta make the life of a corporate treasurer a lot more interesting to have these conversations happening where you have publicly traded healthcare technology companies that are buying Bitcoin on a regular basis here. It's a fascinating world.

Speaker 1 16:00

I talk to a lot of people here at our firm where crypto can touch any industry, it can touch any business. So it's not just technology companies that are working with digital assets. We have not-for-profit groups, we have manufacturing companies. So it's really industry agnostic from that point of view where anyone at any point in time can just decide to get into it.

Speaker 3 16:18

Now one of the things that has been highlighted over the past few years with some of the scandals that have happened in this industry is just the importance of internal controls. This is always something that I'm sure you guys have focused on at non crypto companies around cash movement and segregation of duties and things like that. It's especially pronounced in a world where these are bearer assets that are flying across the organization. Maybe talk a little bit about some of the work that you guys are doing with things like SOC audits and how customers are engaging with you.

Speaker 1 16:45

That's one area that we've put more of a focus on nowadays where the controls around both platforms that companies are launching as well as their involvement with tokens. So when we're thinking of an audit perspective, we always wanna make sure that wallet , it's that companies tell us exists , we perform specialized testing on those accounts, very different than we would cash at a bank. And that's regardless if it's held at a third party exchange or if it's held in cold storage and personal wallets. So there are specialized audit procedures around that. But when you think of platforms and how companies are launching some new, whether it's a layer two or it's some type of transaction means that they're launching, we definitely wanna bring in our IT team to make sure that they have a full understanding of the controls around that. Because the way I like to view it is when you think of like a payroll system, when you look at a DP , they have a SOC report done and auditors will rely on that. A lot of this crypto friendly activity, we're trying to fit crypto into the existing infrastructure. So by doing so we have to certainly form some alternative procedures around that and that's where our IT team comes into play. So we're really trying to leverage their expertise, their knowledge on blockchain technology because I would say I'm the first person I don't know how to code, I know how to read blockchain technology and I know how to perform transactions and understand that, but I don't know the first thing about coding. So definitely have to loop in the specialist when it comes to that. It's very interesting because it's not a traditional audit when you think of digital assets, we really have to become specialized and create these alternative procedures. So SOC reporting is one like you mentioned, where we're definitely finding a sweet spot for us to offer opportunities to clients because the biggest thing to think about for a SOC report and the reason why you want to get it's for customers, customers are gonna come to you, can I rely on your platform? And the reason you can rely on's because we had a third party audit firm come in and independently test the controls and the reliance on those controls that you can offer to give that assurance to your customers is really the peace of mind that we're looking for. And it's the same thing for when we think of our stablecoin attestations. The whole reason we do our stablecoin attestations is for the peace of mind for customers that they can have the trust that the reserves exist, that that peg that is out there on the public float, it maintains that one-to-one float. It really comes down to that where we're just trying to make sure all customers at the end of the day can properly rely on those platforms or those tokens.

Speaker 3 19:11

So you mentioned stable coins and that's what I want to talk about next. Something like 60% of every blockchain transaction that is happening in a given day is a stable coin transfer, which is just a thing. These things didn't exist a few years ago and we're at scale in a world where the banks don't have clarity on holding these things yet. SAB 1 21 is still an issue. We don't have a market structure bill yet, and we don't have a stable coin bill yet where a number of these potential issuers are just sitting on the sidelines but ready to go. And it's possible that within the next 12 months we would have SAB 1 21 pulled back a stable coin bill and a market structure bill. So would lead me to believe that stable coins will just continue to proliferate and really be a huge opportunity for all sorts of companies. How are you guys seeing this category and what type of engagements are you undertaking in the stablecoin area?

Speaker 1 20:01

We certainly share a similar mindset to you guys where I think stable coins are the biggest play right now and I think that's the way for digital assets in today's world to grow the most. Because I think when you think of the layman person, when you think of stable coins, it's the easiest way to position how crypto can come into play and the utilization of blockchain technology and what it offers, it's the easiest to ate, right? Because anytime that you think of Bitcoin, you try to explain it to someone, they just immediately go to the price and the volatility and they're like, why am I gonna invest in that? So let's take a step back and just understand the digitization of currency and stable coins are really prevalent to our group as a whole and a lot of the clients that we work with. So as I mentioned earlier, we were working with the first approved stablecoin report and we continue to build that practice. We're also part of the American Institute of CPAs, the AI CPAs subcommittee group for the proof of reserves where we're looking and rolling out more of a standardized reporting format for all token issuers. And I think that goes hand in hand with all these other regulation that you named where we're going to see in the next six to 12 months. A lot of regulation come down the pipeline because I think this is the biggest use case right now for digital assets as a whole. It's not just in the United States. This is a global transaction. It's so easy to send funds around the world and a lot of companies we work with have international developers, international employees to offer that real-time settlement where if they can get paid, I don't wanna say daily because that'd be a lot, but maybe weekly instead of waiting for your biweekly payment or your monthly payment, I think that can get a lot of people on board with the concept of what stable coins can offer. And as far as what we're seeing, I think it goes hand in hand with the increased eye on stable coins on a regulatory front where more and more companies are approaching firms like with they want to be fully compliant, they want to follow the current regulatory framework, whereas four or five years ago there was token issuers left and right, but there was no standardized reporting. So now that we're seeing a lot of this regulation come into play, I think a lot of companies are starting to approach accounting firms because they want to make sure that they're building that public trust, they're getting those proof of reserves reports to make sure that the assets underlying the token exists and they can throw that stamp of approval on their website, they can throw it to the public to show them like, Hey , this isn't just us saying this. This is a third party firm coming in and telling you how it is .

Speaker 3 22:29

When you think about the just the use cases for stable coins here, you mentioned payroll and I think you'll start to see this move in a direction of almost real time payroll in certain cases where you're able to move a stable coin across the world nearly instantaneously. You're starting to see use cases around security settlement even being discussed at some of the large banks. So it'll almost be a tapestry of use cases that all start to emerge here on stable coins . So you could imagine this being a category where you have stable coins on L two stable coins that are issued by banks. It'll be really interesting to see what type of engagements start to pop up just within this one category in the crypto industry.

Speaker 1 23:05

Yeah, and I think a lot of companies, they're not gonna be crypto companies, so they're not gonna be holding Bitcoin or Ethereum, maybe just Ethereum for gas fees or salon or something like that, but they're going to be transacting more frequently with stable coins and just holding it because it's so easy to denominate. We see tons of companies that just are having USDC on the balance sheet or having a tether or having some USDP because it's so easy to transact with. And just having that in your back pocket if and when needed. You can get a lot of more employees like you mentioned onboard , if you're offering that real-time settlement. Now obviously you're gonna have some of that administrative headache if you wanna pay employees every single day, put the brakes on that maybe a little bit, maybe go for like a weekly settlement. I certainly agree. I think it's definitely the biggest use case in my opinion for building crypto in today's world.

Speaker 3 23:51

Another thing you mentioned was proof of reserves. And I would say this is maybe one of the best exports that the crypto industry has brought to traditional financial services. You just think about some of the crises that would've been averted not only in crypto but just in traditional finance over the years, if you were actually able to prove that a financial institution held the assets and was not reating them. Are you guys seeing a lot of engagement on that proof of reserve issue? Curious just how you think about that as a value prop for a company that runs a platform.

Speaker 1 24:21

We're seeing a lot of traction on that area and I think a lot of that stems from the events of 2022, just a lot of the companies that were custodying client funds and a lot of the unfortunate situations that happened there. What stemmed from the entire FDX situation was firms reaching out to us in any capacity that held customer funds, just looking for some type of proof of reserves. And it was difficult to fit what that deliverable looked like because when you think of stable coins , it's very easy. The reporting infrastructure's there, it is governed by the only one that has issued any guidance, New York Department of Financial Services. But any companies that are not under their purview want to follow that best practice. When you think of what's out there for maybe an exchange, there's really not any industry standards yet. And I know we're moving in that direction, but a lot of companies were coming to us at that time to just say, Hey, we need this proof of reserves and we needed yesterday. It was a bit of a fire drill. And I think that whole situation opened many eyes for customers to be skeptical of crypto companies. It was a difficult time in the industry. I think it goes against the entire ethos of crypto, in my opinion, of not your keys , not your coins. When I think of digital assets, I think of financial freedom and I think the innovative payrolls that they offer, the utilization of blockchain technology. But I think we're trying to fit crypto into the existing infrastructure. There is some give and take . So we saw it with the ETFs where any individual that's engaged in purchasing the ETFs, they are held at a third party custodian, which is fully transparent, verifiable, but it's the same thing as the traditional banking world. So I'm holding my money at a third party. What's different than holding my crypto at a Coinbase or a Kraken? It's the same concept. So there was a lot of hectic times from 2018 to 2022 and I think the events of 2022 open a lot of people's eyes to, let's go back to the original whole reason why crypto came to be, I want to have title to my money, I want possession of it and I don't want someone to be able to freeze my accounts at a given point in time. It was certainly eye-opening, but when we're seeing a lot of the proof of reserves, I think a lot of it is difficult to figure out what that deliverables gonna look like. Me wearing my audit hat, it's an entirely different situation where you have almost an IT component of it and we're looking at the Merkel tree component to be able to test certain client funds and give them proof that their account was verified. So it's very nuanced when it comes to things like that.

Speaker 3 26:48

Yeah, I guess you'll see different implementations depending on wallet architecture, but at minimum there should be something in place. You think about what FTX would've looked like if it was forced to be onshore, if there actually was a market structure that would support that type of business in the United States and the thing collapses and then within a couple of hours people are coming to the realization that there's no cold wallets at this exchange, which is just crazy. Think about the technology just supports something new and novel around proving the authenticity of funds and that they're there and the number one in terms of market value, crypto company just wasn't doing it.

Speaker 1 27:23

It's interesting because just the opportunity of what FTX offered, I never used their platform, but I know a lot of clients that had. But when I think of if I'm going to use a third party platform or third party exchange, it is a little assuring to see that Coinbase is SEC regulated. So I think a lot of companies that we work with have made the full transition to Coinbase just based on that fact pattern that they are fully regulated and I'm not using an exchange that's popped up overnight because they offer a thousand different buying options or opportunities. So I think we're seeing more and more companies if they are holding a a third party, someone that is fully regulated, fully compliant, just to check as many boxes to give you almost that peace of mind because it is so unfortunate of what happened. And the lack of transparency is what hurt so many people. Once everything came to light, it was very eye-opening while my funds were completely used to buy a penthouse.

Speaker 3 28:19

Crazy. So one of the things that kind of second order impact of FTX was there was a lot of firms that pulled back from the industry and I'm sure you guys saw this, A lot of your competitors really cut back on servicing startups and working with some of the marquee companies. I would say in the industry it had to have been trying times. What was that like in the post scandal days?

Speaker 1 28:39

We always had a very rigid acceptance committee here at the firm that wasn't just for crypto, that was for many industries where we were waiting for certain regulation. So any of our SEC engagements, we go through full client acceptance, any crypto, any cannabis, it wasn't something new. I think the only thing that made it a little bit more difficult from our perspective, we certainly didn't change our existing practice. I think the only issue was we got a little bit more selective. We certainly worked with any companies we're working with before the FDX situation or anything in 2022, we continued to work with those companies. We didn't turn down because of a change of practice. We continue to service the same lines that we continue to service. But I think as a firm we just started to put our hat of risk on and say, okay, is this opportunity worthwhile for us to work with for a crypto company? What's their opportunity in the market? Can we grow with them? Is there opportunity for us or is this a one and done opportunity? And if it's one and done , is the risk worthwhile for us? So we certainly became selective because as you can imagine at that time, like you said, many firms closed the doors or turned a blind eye a little bit to this space. So there was opportunities flying around left and right. So we had to make sure we were doing our full due diligence and fully vetting any companies that were coming to us, making sure they had the right board in place. 'cause we do full background checks on all management and key personnel. So making sure we have a full understanding of who's involved with this project, is there any token ons we need to understand and look at the white papers. Where are their assets cued? Who are the related parties? So there's a whole host of services that was already in place. So we already had that infrastructure, which was nice. I think it was just there was a little more scrutiny to making sure we were doing that a little bit more diligent. But our practices hasn't changed. We are still tackling this space head on just as we were two years ago, just as we were six years ago when I joined. We're one of the few firms in the space that are working very actively and continue to do so.

Speaker 3 30:29

It helps to have seen the cycles. I remember being at Fidelity in 2014, in 15, and that was after Mount Gox and the press of Bitcoin trended down to like $200. And I was just looking around wondering to myself, when are we just gonna fold up here and I'm gonna have to go find another job here. But it was really the firms during that cycle that stayed with it and kept hiring and kept working with other startups in the industry. They really reaped the benefit when the cycle turned. A lot of firms seem to have sold the bottom here post FTX, not only in terms of the price, but in terms of the human capital side of the business.

Speaker 1 31:03

That's where we saw a lot of opportunity to grow. So during some of those down periods and when we're in the bear market, it's all about persevering and working with the companies, making sure we're helping them stay afloat, but also ourselves. We wanna make sure our practice is maintaining and we're continuing to grow. And I think during those bear markets is where we come through stronger and make sure we have a good reputation of name because we made it through. We have the resources at our back, our team as a whole here at with 'em . When you think of our digital asset practice, that primarily falls under our technology group, which is where I live, and as well as our financial services team for the hedge funds and investment companies. All in, I would say our team of digital asset experts are probably north of 50 and we service over a hundred clients across that we have various specialties, whether it's audit packs , again, under that always symbol like I mentioned earlier. And it's all about just making sure we're staying educated, learning and we're staying relevant. When you're talking to accounting professional or a tax professional and looking for a new service organization to help you grow, it's a partnership. So you wanna make sure you're talking to someone that understands your business and understands the industry that you're in . As we both know, crypto could be a hot topic, it could pop up overnight and everyone is talking about it. You're talking to your families about it. Thanksgiving at 2017, your grandmom was asking about it. I think it's important to keep in mind that you're talking to a professional that understands the industry, has been through it and knows your business because I think at any point in time you could come across someone that may seem reputable, but they just don't understand the nuances that come with working with digital assets, the complexities and making sure that they're keeping your business top of mind

Speaker 3 32:39

A hundred percent. My last question would just be where do you guys think you'll be the most busy over the next 12 to 24 months here in the crypto space? And I guess the risk of the question is just asking you to predict the future here, but if I had to guess, there's some categories that are maybe hotter than others. In terms of the engagement front,

Speaker 1 32:56

I am an auditor by trade, so I do stay in my lane. I wish the answer here was audit, but I think over my entire career when digital assets spans about nine years now, it's always been tax tax, tax tax. Corporate tax work continues to stay. It's here every year as well as on the individual side. So we work with both individuals and corporate businesses, but I think that's the area where we see the most opportunity and the most growth. And it really came to light when we were back at consensus a couple months ago. We've been sponsoring, we had a booth for the last couple years. 75 to 80% of our discussions are always tax related . It continues to stay top of mind for individuals and companies and it's continually where we see the most growth. So I think as the industry or market I should say, as prices go up, businesses do better. I think that's just the wind in our backs and we continue to see more and more opportunity there. I'm not a tax professional, so I just know where to steer those discussions too in-house . But I think one area that I'm excited about that would impact both rhythm as well as the industry as a whole is tokenization of like real world assets. And I think that's been something that's been tossed around for a couple years now. But I think we're starting to gain some traction and I think over the next two to three years, we're gonna see a lot of traction there. Because when you think of the regular individual that might not understand what crypto can do or what digital assets can do, and the underlying technology, we always say blockchain technology is the way of the future, right? That's gonna be where the whole community comes together and really brings digital assets to the forefront is the use of blockchain technology. I think that tokenization component is what's gonna bring it to light tokenization of real estate tokenization of personal identifying credentials. You're identifying information. I always have a funny example where I think this should have happened four years ago. 'cause I bought my house in 2020 and I don't think my deed to my house got registered for about five months after I purchased my house. Should have been done the day I signed.

Speaker 3 34:56

I think you're right on this real world asset front. I think a lot of the projects that were attempted on private blockchains back in the 2016 time period, we're starting to see that dream be realized in the form of a public asset, public chain in some cases permissioned on top of public. But if you just look at the quantum of capital that is attempting to tokenize right now versus what's in market, it's a stark difference. And it's probably a market structure bill, if I had to guess. That really pushes us over over the line in terms of actually getting some of these assets on chain in trading. So I'm excited about that category too.

Speaker 1 35:28

I think that's gonna be a big way of growth for the community . So I know we talked about stables at length . I think that's gonna be a really good headwind, but I think what's gonna really hit home to many individuals is tokenization of real world assets.

Speaker 3 35:40

Well Mark , thank you for all you do and with does for the industry and supporting the startups in the ecosystem. Where can we send people to learn more about you guys' offerings?

Speaker 1 35:50

So you can visit our website@with.com. That's wit HU m.com . We have a landing page for our digital assets group. You can contact me right on the page. And we're always looking to speak with companies, speak with founders, speak with individuals. I know that's more from a business opportunity, but also from just a networking opportunity. If you're ever looking to pick my brain, like I mentioned, my cell phone's right in my email signature. So as soon as we connect, you always have a a direct link to reach out to me. So just looking to continue to build our practice, making sure our brand recognition is there. And Matt, I can't thank you enough for having me on.

Speaker 3 36:21

Thanks for coming on, mark . Really enjoyed it.

Speaker 1 36:23

Appreciate it.

Speaker 3 36:25

Thanks for listening to another episode of On the Brink with Castle Island. To find out more about Castle Island, visit Castle island.vc. To listen to all of our podcast episodes, please go to on the brink podcast.com or just click on the tab in our website. Thanks for listening .