New Regulations to Create Market for Crypto Services for Ukrainians
Ukrainians owning cryptocurrency will benefit from the law “On Virtual Assets” as it will introduce investor protection and allow them to legally exchange and declare their crypto holdings. The legislation will make virtual assets “a completely legal and common phenomenon for the government and the society,” Ukraine’s Deputy Minister of Digital Transformation, Oleksandr Bornyakov, said in an interview with the financial news portal.
The official expects to also see a whole new market for services allowing coins to be stored, exchanged, and used in payments. Although the draft states that cryptocurrencies are not a means of payment in the country, it will be legal to pay with crypto through an intermediary providing instant conversion to Ukrainian hryvnia, Bornyakov explained. The same currently applies to foreign fiat currencies like the U.S. dollar that can be spent through a bank card, for example.
The virtual assets bill was voted through at the first reading in the Verkhovna Rada, Ukraine’s parliament, in December. Since then, it has been revised and in June the parliamentary Committee on Digital Transformation recommended its final adoption, despite criticism from regulators in Kyiv. In July, government and business representatives unveiled a roadmap to achieve the integration of cryptocurrencies into the country’s economy within the next three years.
Crypto Exchanges to Apply for Permits to Operate in Ukraine
Oleksandr Bornyakov also announced that cryptocurrency exchanges will have to acquire permits to provide services to Ukrainians and will be checked by regulators. He emphasized this is not a licensing regime as the procedure will be much simpler. Foreign-based trading platforms, for instance, will not be required to register as a legal entity in the East European nation. They’ll only be obliged to meet certain authorized capital requirements. The minister remarked:
We understand that the business with virtual assets is global, so if we set conditions for registration in Ukraine, crypto exchanges will not enter our country.
Regarding the introduction of customer verification requirements, Bornyakov insisted Ukraine should adhere to international recommendations in this area. “Virtual assets are the future for both Ukraine and the world… However, if they are a tool of the ‘black market,’ of money laundering, they will not become a mainstream technology,” he elaborated. But he also noted the Ukrainian government doesn’t want to hinder the development of this new industry with over-regulation.
The crypto law provides for the establishment of a new regulatory body – the National Service for Regulation of Virtual Assets. This will be a fully independent state agency that will issue permits for crypto companies operating in Ukraine. Existing regulators, such as the Ministry of Finance, the National Bank of Ukraine (NBU), and the National Securities and Stock Market Commission (NSSMC) will have their own responsibilities. For example, the NBU will provide oversight for stablecoins while the NSSMC will take care of crypto derivatives.
Bornyakov said that texts in the bill pertaining to crypto taxation and the respective amendments to the Tax Code are still under consideration and will likely be submitted to the Rada in September. The government wants to make it clear that crypto transactions are not subject to VAT and make sure only the difference between their purchase and sale values are taxed. The Digital Ministry has proposed the tax rate for individuals be cut down to 5% from the current 19.5%.