Ukrainian lawmakers have taken an important step in their efforts to regulate the country's growing cryptocurrency sector, as parliament approved a draft law that will introduce tax obligations on digital asset transactions.
Yaroslav Zhelezniak, a Ukrainian parliamentarian, said on 3 September that parliament had approved the draft law in its first reading. The legislation provides a clear tax framework for the use of cryptocurrencies in the country and will "replace an uncontrolled black market with a regulated one".
"The Rada voted in the first reading on #10225-d - legalisation of the virtual asset (crypto) market in Ukraine and defining the rules for their taxation," Zhelezniak said. 'I don't see the point of writing too much about what it contains; there will be many changes before the second reading. PS General taxes will be (18+5 per cent) on profits, and for the first year there will be a subsidised rate of 5 per cent on exit in fiat. Who will be the regulator (NBU or NSSMC) is still unknown."
Legislators introduced an 18% income tax on digital asset transactions, as well as a 5% tax to fund the country's army in the war against Russia. According to the proposal, tax payments will not be applied for the next 12 months, while crypto users who convert tokens into fiat currency upon withdrawal will be subject to a reduced 5% tax.
The National Bank of Ukraine (NBU) and the National Securities and Stock Market Commission (NSSMC) have been named as the institutions that are likely to regulate the market, although the country has not yet named specific authorities. Lawmakers have also signalled that the bill could be amended before the second reading.
Parliamentarians have felt increasing pressure to formalise rules on cryptocurrencies, especially against the backdrop of growing concerns about illicit activities related to digital assets.
A report by the Royal United Services Institute (RUSI), published last month, estimated that Ukraine could recover up to $10 billion by further regulating the cryptocurrency market and closing potential loopholes.
High Crypto Adoption
The RUSI study identified the "massive OTC markets" in the country as a key loophole that could be exploited to evade donor verification, purchase sanctioned military components, and launder money through networks of front men. RUSI also warned that these loopholes pose potential geopolitical threats, as they could provide channels for foreign countries to raise funds and use them for political interests aimed at destabilising democratic states.
Experts have also pointed out in the past that Russia could exploit Ukraine's vulnerability in the war to finance its own activities, with some claiming that Russia's Federal Security Service (FSB) could collaborate with intermediaries based in Ukraine to channel illicit capital.
Ukraine is one of the most active crypto markets in the world, as demonstrated by a report by Chainalysis. The country is ranked 9th globally and 1st in Eastern Europe in terms of cryptocurrency adoption.
