Regulation of cryptocurrency in Ukraine in 2024

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After the explosive growth of the digital market in 2017, states are thinking about the need to control a new asset class. Regulation of cryptocurrencies is needed to protect citizens from loss of investments and fraud. It also prevents the development of crime. Cryptocurrency in Ukraine received official recognition in 2021. Bill No. 3637 “On virtual assets” was adopted by members of the government in the second reading.

Legal status of cryptocurrency in Ukraine in 2024

Digital assets are only becoming more popular over time. However, it is dangerous to use them without state regulation for various reasons. The main one is the risk of fraud. There is a high probability that when paying for goods or services in crypto-assets, the counterparty will not fulfill its obligations. If there are no regulations, the courts will not consider the offense and will dismiss the claim.

Regulation of cryptocurrency in Ukraine in 2024 — Growth in [tooltip id=”118659″]digital market capitalization[/tooltip] from 2017-2022.

According to the law “On Virtual Assets”, coins and tokens will not become a means of payment in the country. The only instrument for the purchase of goods remains the hryvnia. Digital currency is accepted as an intangible good that has value. Also, cryptocurrencies are an object of civil rights.

The law has divided digital assets into 3 types:

Unsecured. Familiar cryptocurrencies with a floating rate (Bitcoin, Ethereum and others).
Secured. Assets that prove ownership and give the right to claim the company’s income.
Financial. Assets secured by classic instruments (gold, silver, dollars, euros and others).

Legal entities and individuals who provide cryptocurrency storage and management services are required to register their activities with state authorities.

The bill does not directly address the topic of NFT. In order to officially fix non-mutualizable tokens to the owner, it is necessary to create an instrument in the legal system.

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Details of the law on virtual assets

In the regulatory act, the regulator tried to touch on many nuances. The law defines the concept of a wallet for coins and tokens. This is a program or hardware device that contains data about crypto assets belonging to the user. A private key allows this information to be managed in the blockchain.

Legal entities and individuals supplying services on the cryptocurrency market in Ukraine must register. The cost of the license for different types of activities is presented in the table.

Activity	Cost for residents (UAH)	Cost for foreign citizens (UAH)
Storage of coins and private keys	136 th.	680 thousand
Trading operations with digital currencies	85 th.	425 thousand.
Transfer of funds	85 th.	425 thousand.
Intermediary services	68 th.	340 thousand.

The license will be issued to service providers for 1 year. Upon its expiration, it is necessary to extend the license by submitting the required documents. The bill details the specifics, as well as the procedure for obtaining a license to operate. Companies with a license are required to conduct KYC and AML operations.

It will not be possible to purchase a license from providers registered in the Russian Federation.

The law defines such rights of cryptocurrency market participants:

The choice of providers of necessary services.
Judicial protection of owners of cryptoassets.
Request for information about the company’s activities.
Self-determination of the value of digital currency.
Protection of personal information.

Features of regulation and taxation

Control over unsecured cryptoassets is transferred to the Ministry of Digital Transformation. It is the responsibility of the state center to prevent any illegal activity. The regulators of secured and financial cryptocurrencies are the National Bank of Ukraine (NBU) and the Securities Commission, respectively.

The law “On Virtual Assets” will come into force after amendments to the Tax Code. Since 2017, many drafts have been proposed. Most of them have been withdrawn. At the beginning of 2023, only draft amendment No. 2461 of November 15, 2019 is under consideration. The document provides for the introduction of personal income tax on cryptocurrency transactions in the amount of 5% for up to 5 years.

Mining in Ukraine in 2024

The adopted law does not affect the topic of mining. Therefore, the mining of cryptocurrency is allowed in Ukraine. Also, this activity does not need to be licensed on the recommendation of FATF (international organization that develops measures to combat money laundering).

Frequent questions from users

💰 Is VAT introduced for transactions with cryptoassets in Ukraine?

There is no value added tax for transactions with digital currency. It applies only to manufacturers of hardware wallets and mining equipment.

❗ What liability do companies that do not register their activities in Ukraine bear?

Cryptocurrency service providers will be fined for non-compliance with the state requirements.

❔ Can the authorized capital be formed from bitcoins?

There is no direct ban on transactions at the beginning of 2023. However, the government plans to introduce such a restriction in the future. This is due to the high volatility of the BTC exchange rate.

✅ What is the KYC and AML procedure?

Each customer must provide proof of identity. This is necessary to prevent fraud, financing of illegal activities and money laundering.

❕ Is it necessary to register crypto coin mining?

Yes, however the procedure is complicated. It is recommended to contact lawyers to register mining.

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Author: Saifedean Ammous, an expert in cryptocurrency economics.