Will Ukraine become the “European El Salvador” — the first country on the continent to recognize cryptocurrency as an official means of payment? Who will be the first to receive salaries in digital hryvnias?
Ukraine has long been striving to become a full-fledged democratic European country. Since the fall of 2019, there have been events at the legislative level of the state that can be regarded as “Yes” to cryptocurrency in Ukraine. This could mean that advanced blockchain technology will be available to residents of Ukraine with full protection of their rights even earlier than in more developed neighboring countries. What events lead us to believe so, we’ll share below.
FATF claims as an impetus to create cryptocurrency laws
The impetus for active action by the ministries and departments of Ukraine to legalize cryptocurrency were the claims from the FATF, which were sent in the fall of 2019.
As a result, on December 6, 2019, Ukraine adopted the Draft Law on Combating Terrorism Financing and Legalization (Laundering) of Proceeds of Crime, which designated virtual assets (VAs) as a means of accumulation and investment.
The law can be called revolutionary and innovative, because Ukraine was the first among the post-Soviet countries at the national level to deal with the recognition and regulation of the cryptocurrency market.
It is important that after the adoption of the law, it became possible in Ukraine to legally exchange fiat currency for cryptocurrency.
The next task was to pass laws in the field of cryptocurrency, which would allow Ukrainian businesses to legally conduct financial transactions with cryptocurrency. One of those concerned was the founder of the KUNA exchange, Michael Chobanian, who is still actively involved in promoting such laws and communicating their importance to officials.
Since 2019, the Blockchain4Ukraine group of people’s deputies of the Verkhovna Rada is actively involved in proposing laws on the cryptocurrency sphere.
Cryptocurrency market development plan until 2024 in Ukraine
In March 2021, the first meeting of the Virtual Assets Foresight Project was held to discuss the future of digital currencies in Ukraine. As a result of the meeting, the Ministry of Digital Transformation of Ukraine was tasked to develop a strategy for the country’s development in the field of cryptocurrencies for 3, 5 and 10 years.
The first such document in the form of a roadmap was provided on July 21, 2021. This is a plan for the country’s cryptocurrency market development for 3 years.
During this period, the basic laws regarding cryptocurrency should be developed and adopted, educational programs in the field of blockchain technology should be created, and the rate of cryptocurrency use by residents of the country should reach 50%.
The logical continuation was the Law on Payment Services, which was signed by Ukrainian President Volodymyr Zelensky in late July 2021. Based on this document, the National Bank of the country has the right to issue its own digital currency. In addition, the National Bank will test services based on innovative technologies.
It can be assumed that as a result, it will be possible to pay in digital hryvnia even for groceries in the store.
The digital hryvnia will be tested on officials before the end of 2021, issuing salaries to civil servants in e-hryvnia.
The Law on Virtual Assets is adopted
The “Law on Virtual Assets” was adopted by the Verkhovna Rada on September 8, 2021. It was approved at first reading on December 2, 2020, and throughout this time the law was discussed and refined.
The law provides a detailed explanation of VA (virtual assets) and how they are used. VAs are divided into secured and unsecured. Cryptocurrency belongs to the latter.
VAs can be used for investing money, but they cannot be a means of payment. That is, now it is impossible to buy anything in Ukraine for cryptocurrency, the hryvnia remains the only means of payment of the country.
Now, VA market participants can:
- defend their interests in court;
- open bank accounts for settlements in VA;
- independently determine the price of VA.
The important thing is that the functions of legal entities-service providers s with VAs are defined:
- storage and management of VA and keys to them;
- exchange, transfer and intermediary services.
It is planned that in order to provide this type of service, legal entities will need to obtain permission from the state authorities that are responsible for this. The permit will be issued for one year for each type of the above services, then the permit can be renewed.
On the one hand, it is promised that the permit will be simple and with the ability to apply online, on the other hand — the cost of such permits is quite high. But in general, the issuance of permits will help replenish the treasury of the Ukrainian budget, and ministry officials will be interested in the rapid issuance of these documents.
A special authority will be responsible for issuing permits, which must form the Cabinet of Ministers of the country within 6 months.
Amendments to the Tax Code — the main expectation of business
The “Law on Virtual Assets” has been passed and is being actively discussed, but it will come into force only after the amendments to the Tax Code are created and adopted.
There is already information on income tax on cryptocurrency transactions. It is planned to fix it at the level of 5% for legal entities and individuals.
The draft of amendments to the Tax Code has been created and will soon be discussed by deputies.
In any case, the Ukrainian authorities made a big step to integrate cryptocurrency into the country’s life and further development. Citizens of the state and businessmen can only wait for the new Tax Code and learn to live in in the world of blockchain.