On February 17, 2022, the Verkhovna Rada of Ukraine re-adopted a law designed to set a legal framework for the digital asset market. The decision was supported by 272 deputies. The draft law No. 3637 “On Virtual Assets” was adopted at the first reading in December 2020 and at the second – on September 8, 2021, but the document was vetoed by President Volodymyr Zelenskyy. Later, the Committee on Digital Transformation considered and supported the proposals of the head of state and gave recommendations that deputies vote for the law.
Legalization of virtual currencies: main provisions of the law
The new law introduces crypto-assets into the legal field of Ukrainian legislation, defines the specifics of the legal status of tokenized assets and crypto assets, the rights and duties of market players. Thus, users and market participants will be granted an opportunity to open accounts for operations with cryptocurrency, and cryptocompanies will be able to officially earn money in Ukraine, but prior to that, they must register. Earlier, Ukrainian citizens could open such companies exclusively in countries with appropriate regulation, for example, in Lithuania, Malta, Switzerland, Gibraltar, or others. The law will also grant the right to declare income in cryptocurrencies, open bank accounts for cryptocompanies, guarantee legal protection of rights connected to digital assets and bring the cryptomarket out of the shadows.
Regulations of operations with crypto assets fall under the responsibility of two regulatory bodies: the National Commission on Securities and Stock Market (NSSMC) and the National Bank of Ukraine, as the formation of a separate agency would require significant expenses from the state budget. Additionally, the law provides for the making of a register of businesses connected to the turnover of virtual assets.
Among the duties of the NSSMC will be to implement state policy, set the procedure for turnover, provide licenses to service providers of tokenized assets and crypto assets, and conduct monitoring within the digital asset market.
The launch of a legal digital asset market will contribute to the de-shadowing of this market, the daily turnover of which in Ukraine is almost one billion hryvnias (approx. $35 million). It is worth mentioning that the law is based on the current standards for regulating activities related to tokenized assets and crypto assets of the Financial Action Task Force on Money Laundering (FATF).
Granting a new status to digital assets will create a favorable climate for the development of a new market and will facilitate the flow of funds to the state budget at the expense of certain taxes.
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