Ukraine’s Response to Cryptocurrencies: Examining Crypto Regulations in 2024

Ukraine’s stance on cryptocurrencies has undergone significant simplification over time. The war-torn country has experienced a series of changes, both accepting and rejecting various crypto regulations. However, the Ukrainian government has recently taken a major step by passing a law that officially legalizes the cryptocurrency industry, allowing both foreign and domestic cryptocurrency exchanges to operate legally.

According to a report by Coinpedia, approximately 6.5% of the Ukrainian population, which amounts to around 6.5 million people, own cryptocurrencies. In the midst of the chaos in the country, the Ukrainian government has actively sought out donations and assistance. Cryptocurrencies have emerged as a hero for Ukrainians, as they provide a quick and easy way to receive funds. In fact, in March 2022 alone, Ukraine received donations totaling nearly $55 million.

In 2022, Binance even established a Ukrainian Emergency Relief Fund to support the country. These events have contributed to Ukraine’s growing acceptance of cryptocurrencies and its decision to legalize them.

The timeline of Ukraine’s evolving stance on cryptocurrencies is as follows:

– In 2014, the National Bank of Ukraine questioned the authenticity and legality of Bitcoin in the country.
– In 2017, a draft was introduced in the Verkhovna Rada, proposing the recognition of cryptocurrencies as a program code that holds property rights. The bill also addressed the taxation of virtual assets, mining operations, and exchanges. It allowed for the exchange of cryptocurrencies for goods and services.
– In 2021, the Verkhovna Rada officially legalized cryptocurrencies, marking a significant turning point for Ukraine. This legislation permitted the legal exchange and declaration of cryptocurrencies and also allowed foreign crypto companies to register blockchain businesses in Ukraine.
– In 2022, the Ukrainian government passed a law that officially legalized the global cryptocurrency industry.
– In the same year, the Verkhovna Rada passed draft law no. 3637, also known as “On Virtual Assets,” which was set to come into effect after amendments to the tax code. However, due to the ongoing war, attempts to change tax legislation were unsuccessful.
– Also in 2022, there was a temporary ban on the purchase of cryptocurrencies as the Central Bank aimed to protect the stability of the national currency, the Hryvnia.
– In 2023, a new draft law, no. 10255, was registered in the Verkhovna Rada but faced criticism.
– A revised version of the draft law, no. 10255-1, was subsequently developed with the support of crypto businesses and the Ministry of Digital Transformation. This new 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 based on European standards, creating 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. Additionally, it introduces a progressive tax system, with personal income tax rates of 5% for the first three years, 9% for the following five years, and a general tax rate of 18% after eight years.

Regarding crypto taxation in Ukraine, the draft tax rules propose a preferential tax rate of 6.5% (5% personal income tax and 1.5% military tax) on gains from the sale of cryptocurrencies by individuals.

Despite the immense pressure from the ongoing war, Ukraine is considered one of the most crypto-friendly countries in the world. With evolving laws and increasing adoption of cryptocurrencies, the cryptocurrency situation in Ukraine is expected to improve further.