Ukraine Adopts Law ‘On Virtual Assets’ to Regulate Crypto Market

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The parliament in Kyiv has passed legislation determining the rules for crypto-related operations in Ukraine. The law “On Virtual Assets” recognizes cryptocurrencies as intangible goods while denying them the status of legal tender. It also regulates the activities and obligations of crypto businesses.

Ukraine Legalizes Crypto Activities, Defines Virtual Assets

Ukraine’s Verkhovna Rada, the country’s parliament, has adopted the law “On Virtual Assets” on second and final reading. The legislation regulates operations with cryptocurrencies in the Ukrainian jurisdiction. Deputies passed the bill with a large majority of 276 votes out of 376 present MPs, with only six voting against the motion.

The long-awaited law will enter into force after lawmakers approve amendments to the country’s tax code pertaining to the taxation of cryptocurrency transactions. The Ukrainian legislature is yet to vote on these changes, Forklog noted in its report on the development.

Provisions of the new law recognize virtual assets as intangible goods, which can be secured and unsecured. However, cryptocurrencies are not accepted as a legal means of payment in Ukraine and their exchange for other goods or services will not be allowed.

The law also introduces the term “financial virtual assets” that must be issued by entities registered in Ukraine. In case these assets are backed by currencies, they will be regulated by the National Bank of Ukraine (NBU), the country’s central bank. If the underlying asset is a security or a derivative, the National Securities and Stock Market Commission (NSSMC) will be the main regulator.

Crypto market participants will be able to independently determine the value of virtual assets, open bank accounts to settle transactions, and seek judicial protection for associated rights. Service providers are required to abide by the country’s anti-money laundering regulations and prevent attempts to finance terrorism using their platforms, just like traditional financial institutions.

Current Ukrainian authorities have maintained a positive attitude towards the country’s growing crypto industry, confirmed by representatives of the executive power this week. During a visit to the U.S., President Volodymyr Zelensky highlighted the importance of launching a legal digital assets market which he described as a “development vector” of the nation’s digital economy. Ukraine’s Minister of Digital Transformation, Mykhailo Fedorov, added the country is working to become an attractive jurisdiction for crypto companies.

The draft law “On Virtual Assets” was voted on first reading in the Rada last December. After introducing a number of changes, lawmakers presented a revised version of the document in June of this year. Following criticism from various regulators, including NBU and NSSMC, the bill was once again amended with the authors taking into account concerns expressed by other government institutions.

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