Ukraine’s Approach to Cryptocurrencies: Examining the Government’s Response to Crypto Regulations by 2024
Ukraine has undergone significant changes in its approach to cryptocurrencies over time. Despite being a war-stricken zone, the country has embraced and rejected various crypto systems. Recently, the Ukrainian government passed a law that fully legalized the cryptocurrency industry, allowing both foreign and domestic cryptocurrency exchanges to operate legally.
Approximately 6.5% of the Ukrainian population, which amounts to around 6.5 million individuals, own cryptocurrency. In the midst of the chaotic situation in the country, the government has been receptive to any form of donations or assistance. Cryptocurrency has emerged as a savior for Ukrainians, as it provides an easy and fast means of support. In March 2022 alone, the government received donations totaling nearly $55 million.
In 2022, Binance established the Ukrainian Emergency Relief Fund, further highlighting the country’s growing interest in cryptocurrencies. Over time, Ukraine has increasingly favored the adoption of cryptocurrencies and eventually made them legal.
The timeline of Ukraine’s journey with cryptocurrencies is as follows:
– In 2014, the National Bank of Ukraine expressed skepticism about the legality of Bitcoin in the country, questioning its authenticity.
– In 2017, a draft proposing the recognition of cryptocurrency as a program code that holds property rights was registered in the Verkhovna Rada. The bill also addressed the taxation of virtual assets, mining operations, and exchanges, allowing for the exchange of cryptocurrency for goods and services.
– In 2021, the Verkhovna Rada legalized cryptocurrencies, marking a significant milestone for Ukraine. This move enabled users to legally exchange and declare cryptocurrencies and allowed foreign crypto companies to register blockchain businesses in the country.
– In 2022, the Ukrainian government passed a law that officially legalized the global crypto industry.
– In the same year, the Verkhovna Rada approved draft law no. 3637 “On Virtual Assets,” which was set to come into effect after amendments to the tax code. However, the ongoing war hindered attempts to change tax legislation.
– Also in 2022, there was a temporary ban on the purchase of crypto as the Central Bank aimed to protect the national currency, Hyrvnia.
– In 2023, a new draft law, no. 10255, was registered in the Verkhovna Rada, but it faced widespread criticism.
– Subsequently, a revised draft law, no. 10255-1, was developed with the support of crypto businesses and the Ministry of Digital Transformation. This law aims to create favorable conditions for the development of the crypto industry, increase budget revenues, and enhance investment attractiveness in Ukraine.
The new draft law, no. 10255-1, addresses several key aspects, including defining the legal status of virtual assets, classifying digital assets and services according to European standards, establishing a special innovative zone where users can operate without prior authorization for three years, and incorporating recommendations from the Financial Action Task Force (FATF) on financial monitoring of the crypto market.
Under the proposed tax rules, individuals selling cryptocurrency would be subject to preferential tax rates of 6.5% (5% personal income tax and 1.5% military tax).
Despite the ongoing war, Ukraine has emerged as one of the leading crypto-friendly countries globally. With evolving regulations and increasing crypto adoption, the country’s cryptocurrency landscape is expected to improve further.