Another crypto-tax software startup is laying off employees

It's been a tough few weeks for crypto tax software startups. 

 ZenLedger cut its staff by 10% this week, according to two sources familiar with the matter. Company CEO Pat Larsen confirmed the layoffs in a statement Friday. 

 Muutto was another such recent startup in a niche and emerging sector. Koinly, ZenLedger's larger competitor, has laid off about 14
 percent of its workforce in recent weeks, Blockworks previously reported. In both cases, the sources were granted anonymity to discuss sensitive transactions. 

 Both the ZenLedger and Koinly layoffs seem oddly timed, with tax season just around the corner, at least in the US. 

 In the case of ZenLedger, half a dozen employees were laid off on December 5 to "extend [the company's] track record for several years" so they could "at a time of great financial uncertainty in the crypto market." and the global macro economy," Larsen told Blockworks. 

 While the net number of affected employees is relatively small — at least for all FTX — the layoffs reflect the ongoing struggle of crypto companies large and small to make ends meet as the bear market continues, the sources said. Even operations that deliberately remained lean and agile faced difficult decisions. The ultimate goal, of course, is to keep the lights on. 

 industry participants expected retail and institutional traders of digital assets to look for almost any opportunity to lock in growing capital losses in 2022 to reduce tax liabilities. But somehow it didn't quite work - at least not enough for the likes of ZenLedger and Koinly.

 The CEO of Koinly said in a statement this week that the startup has observed a "lack of awareness" among crypto investors in reserving crypto losses for tax benefits. Losses on digital assets - like losses on stocks - can be used in the US to reduce tax liability on profits in future years. 

 ZenLedger notified employees of the layoffs in a company-wide meeting, Larsen said, adding that the company will help former employees "transition into new roles as needed." 

 Even with the cuts, ZenLedger's revenue and new customers grew about 100% by the October 2022 deadline, according to Larsen. 

 "We continue to be a very talented and capable team that will use 2023 and beyond to expand into international markets and continue to innovate with new corporate and government products," he said.

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