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March 16, 2022

President Zelenskyy legalizes crypto in Ukraine

Ukraine Ministry of Digital Transformation has officially confirmed Ukraine President Volodymyr Zelenskyy’s legalization of the crypto sector, as Bitcoin, Ethereum, and Dogecoin donations to the country surpass $100 million.

Last month, Ukraine’s parliament, the Verkhovna Rada, passed legislation legalizing digital assets, including cryptocurrency. President Zelensky has now signed the Law “On Virtual Assets,” completing the final requirement for establishing cryptocurrencies’ legal status in the country.

The law allows Ukrainian and foreign cryptocurrency exchanges to legally operate in the country. Closer government oversight of their activities will be implemented in order to provide additional guarantees to their clients.

Furthermore, new taxation regulations will enable the Ukrainian government to obtain a consistent flow of tax revenues, contributing to greater financial stability. The law also allows banks and other financial institutions to open accounts for cryptocurrency companies, allowing for better integration of traditional financial and cryptocurrency operations.

According to Ukrainian officials, it is a critical step toward the development of a developed virtual assets market in the country. Although Ukraine does not recognize Bitcoin and other cryptocurrencies as legal tender, it does provide crypto holders with the necessary legal protection, allowing them to freely invest in cryptocurrencies and create digital portfolios.

Ukraine is likely to consolidate its position as one of Europe’s major crypto hubs, distinguishing itself from other East European countries with more conservative policies.

According to the Global Crypto Adoption Index, Ukraine ranks fourth in the world in terms of population cryptocurrency use. While the initial adoption of Bitcoin, Ethereum, and other cryptocurrencies in Ukraine was largely driven by high inflation and financial risks, recent regulatory changes have created additional stimuli for the crypto market’s development.

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Many crypto investors, in particular, may be interested in legalizing their wealth and virtual assets while paying relatively low taxes. Crypto holders in neighboring countries may reroute their funds to Ukraine in order to avoid economic pressure from their respective governments.

If Ukraine’s regulations are strictly enforced, the crypto and financial sectors will grow rapidly in the coming months. The plausible short-term effects of this policy refer to increased fiscal revenues for Ukraine, which may be critical in light of the country’s current crisis. The main long-term effects of the Law “On Virtual Assets” include the establishment of a strong cryptocurrency market in the country, which combines the major productive efforts of private investors, financial intermediaries, banking institutions, and the Ukrainian government.