Protocol Labs Simplifies Token Compensation in Italy with Toku

Protocol Labs is one of the oldest and most established players in the crypto industry. Founded in 2014, it has been instrumental in advancing the decentralized web, building some of the ecosystem’s most important infrastructure projects — including IPFS, Filecoin, and libp2p.

The company operates as a fully remote organization, with more than 200 employees across 35+ jurisdictions worldwide. Its compensation model reflects the hybrid reality of Web3 work: employees receive a mix of fiat salaries, Filecoin token grants, and in some cases, equity grants.

While this approach allowed Protocol Labs to attract top global talent, it also created significant operational and compliance complexity. Managing payroll and grants across dozens of jurisdictions meant working with accountants, law firms, EORs, and payroll providers—but none of them could fully handle the unique demands of crypto compensation.

As Phil Karl, Controller at Protocol Labs, put it:

“We’ve worked with pretty much every EOR in the industry. They’ve all raised hundreds of millions of dollars but have no idea how to work with crypto companies or how to handle tokens. We love working with Toku because they just get it and they care.”

Challenge: Complex Token & Equity Grant Compliance in Italy

Protocol Labs’ global reach meant each jurisdiction brought its own set of regulatory hurdles. But Italy stood out as one of the most complex cases.

One employee held multiple overlapping Filecoin vesting token grants, equity grants, and a unique tax/immigration profile. Traditional EORs were unequipped to manage:

• The calculation of tax withholding obligations on both token and equity grants.
• The execution of the sell-to-cover process to ensure tax obligations were paid in fiat.
• The local nuances of Italian tax law, which treats token grants differently depending on the type of token, timing of sale, and applicable exemptions.

Technical Note: Italian Token Taxation

Italy’s tax code is particularly complex for token compensation:

• In some cases, a capital gains tax applies if there’s a difference between the sale price and the 30-day average price (used for tax calculations).
• In others, the fair market value (FMV) is determined using the price from a liquid exchange.
• Additional exemptions, rules, and employee-specific factors can change the final taxable amount.

This meant Protocol Labs was stuck with a manual, patchwork internal process — costly, time-consuming, and prone to error.

It was clear the company needed a partner that not only understood tokens and grants, but could also navigate local tax frameworks with precision.

That’s where Toku came in.

Solution: How Toku Helped Protocol Labs in Italy

To address the complex compensation challenges in Italy, Protocol Labs partnered with Toku—the first provider built specifically to manage token compensation, payroll, and compliance on a global scale.

Toku’s role was to simplify what had previously been a manual, fragmented process into a streamlined, compliant, and transparent workflow for both the employer and the employee.

1. Token & Equity Grant Administration

Toku centralized the administration of multiple Filecoin token grants and equity grants. This included:

• Tracking vesting schedules for overlapping grants.
• Ensuring compliance with both employment law and securities law.
• Calculating the fair market value of Filecoin tokens at the precise moments required by Italian tax law.

This eliminated the guesswork and manual coordination that had previously burdened Protocol Labs’ finance and legal teams.

2. Automated Tax Withholding & Sell-to-Cover

One of the most significant pain points for Protocol Labs was executing the sell-to-cover process. Since Italian tax authorities require remittances in fiat, tokens needed to be sold to cover withholding obligations.

Toku automated this process by:

• Determining the exact tax liability for each grant.
• Executing compliant sell-to-cover transactions at market rates.
• Withholding and remitting the appropriate amounts directly to the Italian tax authorities (Agenzia delle Entrate).

This guaranteed compliance while removing the administrative burden from Protocol Labs.

3. Local Expertise on Italian Tax Code

Unlike traditional EORs or payroll providers, Toku brought in specialized local expertise on Italy’s unique tax code. This included navigating:

• The distinction between capital gains and ordinary income taxation.
• Variations in taxation depending on the 30-day average price vs. the exchange FMV.
• Applicable exemptions and deductions for the employee’s specific case.

By combining crypto-native infrastructure with jurisdiction-specific expertise, Toku was able to deliver a fully compliant solution that worked for both the contributor and the company.

4. Contributor Support & Transparency

Beyond compliance, Toku also focused on the contributor experience:

• Providing clear breakdowns of grant values, tax withholding, and net take-home pay.
• Offering support on how compensation would impact immigration status and financial planning (e.g., mortgage applications).
• Giving the employee confidence that their compensation was both accurate and compliant under Italian law.

Results & Impact

By partnering with Toku, Protocol Labs was able to transform one of its most complex employment and compensation cases into a streamlined, compliant, and scalable process.

1. Compliance Confidence

• All token and equity grants for the Italian contributor were managed in strict alignment with local tax regulations.
• The sell-to-cover process was executed automatically, ensuring timely remittance to the Agenzia delle Entrate.
• Protocol Labs gained audit-ready documentation, reducing legal and financial risks.

2. Time & Resource Savings

• What had previously been a manual, patchwork solution across internal teams and external providers was replaced with a single unified process.
• Finance and legal teams saved dozens of hours per month, freeing them to focus on higher-value strategic work.

3. Improved Contributor Experience

• The contributor received transparent reporting on their token and equity grants, including tax treatment and net compensation.
• With proper employment and tax compliance in place, they could confidently navigate immigration requirements and access financial services such as loans or mortgages.
• Overall, employees felt more secure knowing their compensation was being managed correctly.

4. A Scalable Model for the Future

• With Toku in place, Protocol Labs now has a repeatable framework for handling similar complex cases in other jurisdictions.
• The solution proved that crypto-native compensation models can coexist with traditional regulatory requirements—if managed correctly.

Turn Complexity Into Confidence

Protocol Labs’ experience in Italy highlights the very real challenges that come with employing and compensating a globally distributed workforce in tokens. Multiple overlapping grants, evolving local tax rules, and manual sell-to-cover processes created unnecessary risk and inefficiency.

By partnering with Toku, Protocol Labs transformed these challenges into a compliant, automated, and contributor-friendly system. Today, they save time, reduce risk, and give their employees the confidence that their compensation is both fair and legally secure.

Your organization doesn’t need to navigate these complexities alone. Whether it’s token payroll, equity grants, or global tax compliance, Toku delivers the infrastructure and expertise to keep your workforce compliant everywhere.

👉 Get in touch with Toku today and simplify token compensation for your global team.