A new law will regulate crypto transactions, with tax laws mirroring securities treatment, but no tax exemptions for crypto.
Ukraine Nears Completion of Crypto Legalization Bill
Ukraine is on track to legalize cryptocurrency with a new bill set to be finalized by the first quarter of 2025. Danylo Hetmantsev, the head of the Ukrainian Parliament’s Committee on Finance, Tax, and Customs Policy, has confirmed that the draft law is nearing its first reading. The law, still in development, is being crafted with input from both the National Bank of Ukraine and the International Monetary Fund (IMF).
This new legislation marks a significant step toward formalizing the legal status of cryptocurrencies in Ukraine. The bill’s primary focus will be to regulate cryptocurrency transactions, bringing the sector in line with global standards and ensuring it operates within a clear legal framework.
Tax Treatment to Mirror Securities Regulations
The proposed law will introduce a taxation system similar to that applied to securities. Profits from cryptocurrency assets will only be taxed once they are converted into traditional currencies, such as the Ukrainian Hryvnia or the US Dollar. Hetmantsev emphasized that this cautious approach aims to avoid issues of tax evasion and market manipulation, pointing to concerns over potential misuse in traditional markets.
Unlike some other jurisdictions that have adopted tax exemptions for cryptocurrency transactions, Ukraine’s draft law will not include such provisions. The government is seeking to avoid creating loopholes that could lead to tax avoidance. Consultations with European experts and the IMF have played a pivotal role in shaping this cautious but balanced approach to crypto taxation.
Collaboration with International Bodies to Shape Legislation
The development of the crypto bill has been closely coordinated with international organizations, including the IMF and the European Union. These consultations have helped Ukraine develop a comprehensive regulatory framework that aligns with global best practices. The collaboration is expected to bolster investor confidence and promote financial stability within the cryptocurrency sector in Ukraine.
The Ukrainian government is positioning itself as a leader in crypto regulation in the region, providing clear guidelines for both domestic and international players in the crypto market. By working with international bodies, Ukraine aims to ensure that its crypto regulations meet global standards, facilitating cross-border transactions and international investment.
Ukraine’s Growing Interest in Digital Assets
Ukraine has shown increasing interest in cryptocurrency and blockchain technology over recent years, particularly in response to its ongoing conflict with Russia. During the war, Ukraine raised millions of dollars in crypto donations, which were used to fund humanitarian and military efforts. These borderless, decentralized funds have proved vital in supporting the country during its crisis.
Ukraine has also adopted blockchain technology for various state functions, showcasing its commitment to digital innovation. The country is moving quickly to establish a comprehensive legal and regulatory framework to support this growing interest in digital assets and ensure that cryptocurrency transactions are fully integrated into the nation’s economy.
International Compliance with FATF Standards
To align with international standards, Ukraine adopted the Financial Action Task Force (FATF) crypto guidelines in late 2023. This move was designed to help the country avoid being placed on the grey list of jurisdictions with insufficient anti-money laundering (AML) and combating the financing of terrorism (CFT) measures. Ukraine’s adoption of these standards is a significant step in ensuring that the country remains compliant with international financial regulations.
As the draft law nears its first reading, Ukraine’s government is taking a cautious but deliberate approach to integrating cryptocurrency into its economy. This bill is expected to pave the way for future regulatory adjustments that will further support the growth and development of the crypto industry within the country.
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