Crypto Payroll Startup Toku Raises $20 Million
In Silicon Valley and other tech hubs, companies have long been familiar with the challenge of paying a global network of employees in cash and stock. But as the crypto industry matures, companies now have to manage a new type of compensation – digital tokens issued by blockchain projects.
That’s why Ken O’Friel, a Tokyo-based former stock trader, co-founded Toku, a startup that helps crypto companies comply with a range of international tax obligations related to token-based wages.
On Wednesday, Toku announced that it has raised $20 million in a seed round led by Blockchain Capital and other investors, including law firm Orrick and the founders of Protocol Labs and infrastructure firm Alchemy.
“We realized that the hardest part is not tokenomics or the software, it’s how to comply with the law,” O’Friel told Fortune in an interview, explaining that Toku has created a system to track crypto-related tax laws and regulations in dozens of countries.
O’Friel added that when he started building Toku at the end of the last bull market in early 2022, compliance was nowhere near the list of concerns for the vast majority of crypto firms. But in the wake of FTX’s collapse and fierce pushback from regulators, O’Friel says many of those same firms are now treating compliance, including tax obligations, as a top priority.
Toku currently has about 30 clients who are primarily, in O’Friel’s words, “companies that have lawyers,” including decentralized autonomous organizations. These include well-known crypto names such as Filecoin Foundation, Gitcoin, Gnosis, Hedera Hashgraph and PleasrDAO. In the coming year, Toku plans to attract clients from the venture capital industry as well.
Building Toku’s platform, which involved reviewing the tax laws of more than 100 countries, created a “huge legal bill,” says O’Friel. But this unthinkable cost, he expects, will put the startup in a position to be a leader in the ever-emerging field of token-based compensation.
O’Friel co-founded Toku with Dominika Stobiecka, a veteran banker who spent time at the Federal Reserve and has also worked in DAOs. The pair met in Tokyo where they brought in game manager Michael Carter, who helped launch the company and serves as chairman of Toku.
Other investors contributing to the funding round include firms such as GMJP, OrangeDAO, Reverie, Quantstamp and Next Web Capital, and angel investors such as Protocol Labs founder Juan Benet and Cameron and Tyler Winklevoss.
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