Ukraine may legalise cryptocurrencies as early as 2025. However, the government is not ready to provide the industry with preferential terms. Find out what Ukrainians can expect after the legalisation of crypto

Legal advice for Ukrainians

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Ukraine is on the verge of legalising cryptocurrencies, and this process is raising a lot of expectations and discussions among business representatives, government agencies and ordinary citizens. According to a statement made by Danylo Hetmantsev, Chairman of the Tax Committee of the Verkhovna Rada, at the forum ‘Prospects for Domestic Investment’ on 11 December 2024, there is a high probability that legislation will be adopted in the first quarter of 2025. With reference to Mezha, we will tell you what to expect from the legalisation of cryptocurrency and its regulation.

What does the government propose?

In September 2021, the basic law on virtual assets was adopted, but it did not enter into force due to the lack of tax rules. Since 2023, the Verkhovna Rada has been considering two draft laws: No. 10225, developed by the National Securities and Stock Market Commission (NSSMC), and No. 10225-1 from the Ministry of Digital Transformation. These documents are aimed at creating transparent rules for market participants and bringing crypto assets out of the shadows.

The NSSMC's draft law is closer to European standards (MiCA) and provides for strict regulation. At the same time, the initiative of the Ministry of Digital Transformation offers a more flexible tax model with a gradual increase in rates: 5% in the first three years, 9% for the next five years and 18% thereafter. This will allow us to test the effectiveness of tax rules and adapt them to market needs.

Taxes and regulation

The main taxation model is proposed to tax the difference between the invested and withdrawn funds when converting cryptocurrencies into fiat. The rates are planned at 18% of income tax and 1.5% of military duty. However, experts point out the need to take into account losses from transactions with virtual assets to avoid double taxation.

In addition, there is a discussion about who will act as the market regulator. The main candidates are the NBU, the NSSMC and potentially a new commission under the Ministry of Digital Transformation. The International Monetary Fund (IMF) recommends that the regulator should not be appointed until more detailed rules are developed.

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Problems and challenges

Despite the obvious benefits of legalising cryptocurrencies, there are significant challenges:

- Lack of coordination between government agencies;

- high level of bureaucracy for authorising companies;

- difficulty in determining the tax base;

- possible difficulties for citizens due to the requirement of automatic tax payment by exchanges.

It will also take time for a transition period for businesses to adapt to the new conditions.

Expert and business opinion

Analysts and business representatives support legalisation as a way to increase tax revenues and attract investment. According to Global Ledger, Ukraine could receive up to UAH 15 billion in taxes annually. However, it is important to create conditions that will be attractive to business: a flexible tax system, clear authorisation rules and support for innovative solutions.

Some experts suggest the introduction of sandboxes to test new products in a controlled environment, which can stimulate startups and strengthen Ukraine's position as a regional crypto hub.

We remind you! The National Bank of Ukraine intends to test the digital hryvnia next year. We told you how the pilot project is planned to be conducted and what is known about the launch of Ukrainian electronic money.

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