A draft law legalizing cryptocurrencies passed the second reading in the Ukrainian parliament on Sept. 8. Up until now, cryptocurrencies and digital tokens have been in a state of limbo, neither legal nor prohibited.
According to the Kyiv Post, 276 Ukrainian lawmakers voted for virtual asset bill 3637, which now paves the way for a regulatory framework and wider acceptance.
Once passed by President Volodymyr Zelensky, the new legislation will offer protection to crypto asset investors and exchanges from fraud.
Ukraine Opening up to Crypto
According to the Ministry of Digital Transformation, Ukraine intends to open the cryptocurrency market for businesses and investors by 2022. However, before that can happen, parliament must pass a set of laws and amend the Tax Code and the Civil Code. According to the report, experts have stated:
“It defines virtual assets as intangible assets expressed in a form of electronic data. It also explains what a wallet for virtual currency and a private key is — these terms have never been used in Ukraine’s legislation.”
As it stands, cryptocurrencies cannot be used as payments for goods or services, but traders and investors can buy and sell them on exchanges within the country. The new law will allow crypto and blockchain-related businesses to operate legitimately in Ukraine, which plans to attract investment to the country. The government plans to create another regulatory body that will issue permits for crypto companies.
According to Mykhailo Fedorov, Ukraine’s Minister of Digital Transformation, crypto trading is popular amongst Ukrainians, with a daily volume of around $37,000. He added that “only a few countries in the world have legalized crypto assets – Germany, Luxembourg, Singapore. Ukraine will be one of them,”
Oleg Kurchenko, CEO of crypto exchange Binaryx, added that “it will reduce stereotypical attitudes towards cryptocurrencies and will help them to become normal financial instruments.” There was a concern that mistrust of the state could drive some investors away, added Kurchenko.
Illegal Exchange Raids
In mid-August, the Security Service of Ukraine (SBU) raided and closed a number of illegal crypto exchanges that were charging high fees and commissions. It stated that some of the clients of these illicit platforms were known criminals, scammers, and organizers of mass protests.
Earlier this year, the Ukrainian government partnered with Stellar Lumens to develop its digital asset infrastructure and CBDC.