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The federal government has woken up to crypto. Last month, the U.S. Treasury Office of Foreign Assets Control (OFAC) sanctioned Tornado Cash, a cryptocurrency mixing protocol, for its role in money-laundering schemes. Two weeks ago, SEC Chairman Gary Gensler once again pushed for heightened crypto regulation in order to embolden startups in the industry. Then just over a week ago, the White House issued its first-ever framework for responsible development of digital assets. Crypto-related regulatory messaging has risen over 7,400% over the last four years with 2022 being the busiest to date: we’ve had over 4,600 regulatory-related issuances in just the first six months of the year.

In short, the Wild West era of crypto is coming to a close.

With increased regulatory scrutiny bearing down on companies, executives need to know where their crypto assets are at any given time. However, that accounting is very difficult for businesses today, which must navigate B2B payment rails across multiple wallets, chains, custody solutions, exchanges or multi-sigs. Far from automation, the status quo is internally built, manual processes, usually cobbling together crypto transactions (which often involve multiple parties) on a spreadsheet and attempting to reconcile the different transactions with Web2 accounting software providers that weren’t built with the crypto user in mind. 

The complexity of this problem is only compounding as the number of fiat-to-crypto, crypto-to-crypto, and crypto-to-fiat transactions explode with new on- and off-ramps and payout platforms (Stripe recently launched crypto payouts to 110 countries), and as the industry matures with more layers of regulations, audits and exits. This sticky situation is ripe for innovation and is a crucial component of the Lux investment thesis modernizing the crypto infrastructure layer—specifically investing in the development of the “picks-and-shovels” in the financial rails, data & developer stack and risk and compliance safeguards to power both retail usage and institutional blockchain adoption. 

Enter Tactic

Today, we’re thrilled to share Lux’s latest partnership with Tactic, where we invested in the company’s $11 million seed round. Tactic is an integral piece of the crypto infrastructure puzzle, helping businesses track, trace and reconcile crypto transactions at scale. The company unifies crypto transactions across wallets, exchanges and chains, simultaneously integrating with traditional financial services platforms like QuickBooks. Tactic ultimately enables Web2 or Web3 businesses to use a “single pane of glass” for all of their business financial activity.

We first met Tactic founder and CEO Ann Jaskiw at a Women x Web3 breakfast at ETH Denver and were struck by her ambition and high horsepower. Ann is uniquely suited to tackle this growing problem in crypto. She hails from a security engineering background dealing with OAuth and identity providers and scrounging data from messy electronic health records at Flatiron Health. She became enraptured by the mathematical problems that cryptography is solving, but when she set out to build tooling, realized that she and all other nascent companies in the crypto space faced a similar problem: how to run a sophisticated financial operations stack and “close the books”. She saw the parallels between messy healthcare data and messy crypto data (siloed across multiple storage places and chains) and how a strong technology platform could make crypto far easier to work with at scale.

That early vision has evolved into Tactic, which aggregates data across a business’ cryptocurrency holdings and automatically ingests, categorizes and applies logic to taxable transactions. The company’s sophisticated data layer enables quick reconciliation of a business’ crypto subledger with all assets on the balance sheet enabling organizations to book transactions correctly, record tax planning information and handle smart-contract related transactions compliantly at scale.

While Act One of Tactic’s product is a crypto accounting solution, the company is uniquely positioned to expand into a much wider suite of business financial management tools focused on crypto with the vision of becoming a business’ universal crypto financial ledger to serve as the central immune system for all on-chain transactions.

Within a matter of months since launching the product, the Tactic team has executed at warp speed. Tactic has a superlative engineering team that has worked together for several years from companies including Flatiron Health and Chainalysis. They have already accomplished and shipped an aggressive product roadmap working closely with customers expanding across chains. Already, the company has landed several marquee customers processing a high frequency of crypto transactions, including Royal, saving massive hours of labor-intensive work, providing automated transaction reconciliation and business insights.

Joining us in this round are our friends at FTX, Founders Fund, Ramp, Exponent Founders Capital, Definition Capital, Elad Gil, Dylan Field and Sabrina Hahn.

Tactic has the potential to graduate crypto infrastructure to its next stage just as regulatory scrutiny becomes keen. If you’re interested in joining the team, reach out to join the Tactic “Tic Tacs” changing the game of how crypto transactions are processed.

~ Grace Isford & Brandon Reeves

Web3 is so far behind in terms of reliability and security