Crypto Regulations In Ukraine 2024: How is the Government Responding to Cryptocurrencies

Ukraine, with time, has simplified its stance on cryptocurrencies. As time has evolved, the war-stricken zone has adopted and rejected many crypto regimes. The Ukrainian government has passed a law that officially legalised the cryptocurrency industry in the world, thus allowing foreign and Ukrainian cryptocurrency exchanges to operate legally.

In this report by Coinpedia, we have listed down all important events in the zone. Ukrainian take on cryptocurrency has been discussed in detail below!

Introduction

Approximately 6.5 million Ukrainians, which is 6.5% of the total population in the country, own cryptocurrency. Amidst the chaotic scenario in the area, the Ukrainian government has always looked out for any form of donations or help they could get. Cryptocurrency unveiled itself as a hero for Ukrainians! The government realized that the crypto donations were the easiest and the fastest that could come to them, with almost $55 million in donations in a week in March, 2022. Binance was also seen running a Ukrainian Emergency Relief Fund in 2022.

Through many instances, Ukraine started favoring the adoption of Cryptocurrency and thus made it legal!

The Timeline

• In 2014, the National Bank of Ukraine made a statement about the legality of Bitcoin in the country, questioning its authenticity.
• In 2017, a draft was registered in Verkhovna Rada, which proposed cryptocurrency to be recognised as a program code that is an object of property rights.  The bill stated about the taxation of virtual assets, mining operations and exchanges. It provided for the free exchange of cryptocurrency for values like services or goods.
• In 2021, Verkhovna Rada legalised cryptocurrencies, making it a turning point for Ukraine. It allowed users to legally exchange and declare them. It also allowed foreign crypto companies to register blockchain businesses in Ukraine.
• In 2022, the Ukrainian government passed a law that officially legalised the crypto industry in the world.
• In 2022, Verkhovna Rada passed the draft law no. 3637 “On Virtual Assets” which was about to come into force after amendments to the tax code. All the attempts to change tax legislation went in vain due to the ongoing war.
• In 2022, there was a temporary ban on the purchase of crypto as the Central Bank sought to preserve the health of its national currency, Hyrvnia!
• In 2023, a new draft law no. 10255 was registered in the Verkhovna Rada. It was widely criticized!
• A new draft law no. 10255-1 was developed with the support of crypto businesses and the Ministry of Digital Transformation. The law is stated to help create optimum conditions for the development of the crypto industry, increase budget revenues and improve investment attractiveness in Ukraine.

All about the new draft law no. 10255-1

After various amendments to the draft law, the draft law no. 10255-1 was passed which took care of the following:

• Defining the legal status of virtual assets
• Classifying digital assets and services by the European standards for the regulation of crypto assets (MiCA)
• Providing for creating a special innovative zone where users will be able to work without prior authorization for three years
• Taking into account and adapting the FATF recommendations on financial monitoring of the crypto market.
• It provides for the payment of 5% personal income tax (for the first three years) , 9% (for the next five years) and 18% to be applied as a general tax rate after eight years.

Crypto Taxation In Ukraine

Under the draft tax rules, the gain by an individual on selling cryptocurrency would be taxed at preferential rates of 6.5% (5% personal income tax at 1.5% military tax). 

The registered draft law provides for the payment of 5% personal income tax (for the first three years) , 9% (for the next five years) and 18% to be applied as general tax rate after eight years. 

Conclusion

While Ukraine remains under immense war pressure, it is counted as one of the top crypto-friendly countries in the world. With changing laws and crypto adoption, we could expect a lot more improvement in Ukraine’s cryptocurrency situation.