Currently, there are no regulations that govern cryptocurrencies in Ukraine. In 2018, the Ministry of Economic Development of Ukraine circulated its “Concept of State Policy in the Field of Virtual Assets,” which prompted a national legal and policy framework for various cryptocurrencies. By doing so, the Ministry of Economic Development intended to give meaning to key legal terms relating to virtual assets, as well as amend its taxation and financial sector legislation to apply to issues related to cryptocurrencies.[1] It was announced that the Concept was to be implemented in two stages, the first of which was to take place between 2018 and 2019, and the second of which was to take place between 2020 and 2021. During the first stage, the Ministry of Economic Development aimed to establish the legal status of cryptocurrencies, begin the monitoring of entities participating in the cryptocurrency trade, and track trends in the market worldwide. During the second stage, the Ministry of Economic Development aimed to legally recognize virtual currency custodians through those entities involved in financial sector monitoring and create a larger legal and regulatory framework for the use of virtual assets, smart contracts, and tokens as a whole.[2]
Now, the national parliament is awaiting passage of a framework draft bill called “On Virtual Assets,” which is intended to grapple with the following issues:
lack of legal regulation of relations arising in the field of circulation of virtual assets; lack of mechanisms for taxation of income received from transactions with virtual assets; lack of legal guarantees to protect the property rights of the virtual assets market participants; regulation of the activities of the virtual assets market professional participants; lack of mechanisms to control the circulation of virtual assets that can be used to legalize (launder) proceeds of crime, terrorist financing and financing the proliferation of weapons of mass destruction; lack of effective mechanisms to attract foreign investment in high-tech sectors of Ukraine’s economy.[3]
If passed, the new law will require, among other things, crypto service providers to register with the government, disclose information on ownership structure and beneficiaries, take measures against money laundering, and ensure that the personal data of their clients are protected.[4]
Per a recent press release by the Ministry of Economic Development, the government does not recognize the term “cryptocurrency” but has alternatively adopted the terms “virtual assets” and “virtual currencies.”[5] On December 2, 2020, “On Virtual Assets’ passed its first hearing, and the national parliament is currently working on a set of amendments to prepare for the final two hearings.[6] In particular, the framework draft bill considers such virtual assets to be “a set of data in electronic form,” which “can be an independent object of civil transactions, as well as certify property or non-property rights.” However, virtual assets are not considered legal tender but rather “non-material assets,” much like intellectual property, and should be reported as such for purposes of taxation.[7]
Once passed, the national parliament plans to consider another bill in its pipeline establishing a broader taxation regime for cryptocurrencies, where cryptocurrency would be taxed at a rate of five percent for the first five years, and then the personal income rate of eighteen percent for every year following. Such favorable taxation regime is projected to be extremely popular among crypto startups.[8]
P.S. Insights on Cryptocurrency Legal Issues
Most jurisdictions and authorities have yet to enact laws governing cryptocurrencies, meaning that, for most countries, the legality of crypto mining remains unclear.
Under the Financial Crimes Enforcement Network (FinCEN), crypto miners are considered money transmitters, so they may be subject to the laws that govern that activity. In Israel, for instance, crypto mining is treated as a business and is subject to corporate income tax. In India and elsewhere, regulatory uncertainty persists, although Canada and the United States are relatively friendly to crypto mining.
However, apart from jurisdictions that have specifically banned cryptocurrency-related activities, very few countries prohibit crypto mining.
Our Freeman Law Cryptocurrency Law Resource page provides a summary of the legal status of cryptocurrency for each country across the globe with statutory or regulatory provisions governing cryptocurrency. The globe below provides links to country-by-country summaries:
Is cryptocurrency legal in Ukraine?
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[1] Library of Congress, Crypto Assets, Loc.gov.
[2] Library of Congress, Crypto Assets, Loc.gov.
[3] Information Department, The draft Law “On Virtual Assets” adopted as a basis, Verkhovna Rada of Ukraine, News Centre (December 2, 2020).
[4] Anna Baydakova, From Risky to Promising: Ukraine’s Quest to Become a Dream Crypto Jurisdiction, CoinDesk (May 17, 2021).
[5] Press Service of the Ministry of Economic Development, The Ministry of Economic Development Initiates the Legalization of Cryptocurrencies in Ukraine, Ministry of Economy Ukraine (October 25, 2018); Library of Congress, Crypto Assets, Loc.gov.
[6] Information Department, The draft Law “On Virtual Assets” adopted as a basis, Verkhovna Rada of Ukraine, News Centre (December 2, 2020); Anna Baydakova, From Risky to Promising: Ukraine’s Quest to Become a Dream Crypto Jurisdiction, CoinDesk (May 17, 2021).
[7] Anna Baydakova, From Risky to Promising: Ukraine’s Quest to Become a Dream Crypto Jurisdiction, CoinDesk (May 17, 2021); Anna Baydakova, Ukrainian Taxpayers Will Now Have to Report Crypto Holdings, CoinDesk (March 4, 2020).
[8]Anna Baydakova, From Risky to Promising: Ukraine’s Quest to Become a Dream Crypto Jurisdiction, CoinDesk (May 17, 2021).
