Cryptocurrency in Ukraine: How Law № 2074-IX could change the “rules of the game”
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Cryptocurrency has become an integral part of the modern financial system, attracting the attention of both investors and regulators worldwide. In Ukraine, the legal status and regulation of cryptocurrencies have remained uncertain for a long time. The adoption of Law № 2074-IX "On Virtual Assets" on February 17, 2022 ("Law" or "Law № 2074-IX") was an important step toward the legalization and establishment of rules for the cryptocurrency market. However, it is worth noting that this Law has not yet come into force.
Under these circumstances, it should be stated that cryptocurrency in Ukraine remains unregulated. The lack of legislative regulation creates legal uncertainty for market participants and investors.
Key Provisions of the Law
The Verkhovna Rada of Ukraine, taking into account global trends and the recommendations of the Financial Action Task Force (“FATF”), adopted a law that defines the legal status of virtual assets and establishes rules for their circulation in Ukraine.
Key aspects of this regulatory act:
Impact of the Law on the Cryptocurrency Market
The adoption of the Law aimed to create clear and transparent “rules of the game” for cryptocurrency market participants in Ukraine.
Expected outcomes included:
Challenges and Prospects of Implementation
Despite the positive aspects, the implementation of the Law may face several challenges:
Expert Opinions
Experts have generally positively assessed the adoption of the Law. It was noted that clear regulation would contribute to market development and increase investor confidence. At the same time, some specialists emphasize the importance of balancing regulation and market freedom to avoid hindering innovation.
Vadym Hrusha, CEO of Trustee Plus, stated in an interview: “The adoption of legislation in the field of virtual assets is an important step for Ukraine. It not only legalizes the market but also creates conditions for its transparent and secure development.”
Why has the Law not entered into force and may not enter into force at all??
The Law “On Virtual Assets” has not entered into force due to a number of conceptual and practical shortcomings that require significant revision. The main reasons are problems with taxation and accounting, as well as the need to bring the legislation in line with EU norms.
Thus, the Law stipulates that it will come into force only after the Law of Ukraine “On Amendments to the Tax Code of Ukraine on Peculiarities of Taxation of Transactions with Virtual Assets” comes into force.
Looking ahead, it is worth noting that such amendments to the Tax Code of Ukraine (“TC of Ukraine”) have not been made.
This is due to the fact that the draft amendments to the Tax Code of Ukraine provided for a simplified taxation system for some types of crypto assets, which could create ample opportunities for tax evasion, as well as even VAT exemption for all types of virtual assets.
The absence of financial safeguards could have led to large-scale tax evasion and legalization of gray business through cryptocurrencies.
The Law № 2074-IX defines virtual assets as intangible assets. However, the Civil Code of Ukraine provides for only three types of intangible assets:?
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Thus, virtual assets did not fall under any of these categories, which complicated their legal status and protection.
On August 10, 2023, Law № 3320-IX “On Amendments to the Civil Code of Ukraine to Expand the Range of Civil Rights Objects” was adopted, which amended the Civil Code of Ukraine and introduced the concept of a “digital thing”.
This made it possible to classify virtual assets as property objects, but at the same time raised new questions about their divisibility, derivability, and legal status in different jurisdictions.
In this context, on March 22, 2024, the International Monetary Fund (“IMF”) published an Updated Program for Ukraine under the Extended Fund Facility. The document provides for changes to the current legislation on virtual assets that may significantly affect the country’s cryptocurrency market.
According to the IMF, the current regulatory framework in the field of virtual assets may pose risks to price stability and the effectiveness of monetary policy. Therefore, by the end of December 2024, the National Bank of Ukraine (“NBU”), together with the National Securities and Stock Market Commission (“NSSMC”), with technical support from the IMF and after consultation with its experts, were to prepare an updated version of the legislation to regulate the virtual assets market. However, to date, no updated draft law has been submitted.?
The proposed draft law is expected to be developed in line with international standards and best practices, and to promote economic development while minimizing potential risks to Ukraine’s financial stability.
This means that the adopted Law № 2074-IX will be revised, and its updated version, according to the most optimistic forecasts, may be signed by the President of Ukraine no earlier than early 2026.
The document is planned to be submitted for the first reading in the Verkhovna Rada, and its final adoption is possible in the first quarter of 2025. This was announced by the Chairman of the Verkhovna Rada Committee Danylo Hetmantsev.
Conclusion
Law № 2074-IX “On Virtual Assets” is an important step towards legalizing and regulating the cryptocurrency market in Ukraine. Its implementation will help attract investment, enhance security and integrate Ukraine into the global financial space. At the same time, successful implementation will depend on the efficiency of implementation and adaptation to the new market realities in this area.?
However, the prospects for the implementation of this Law are unclear, and a legal gap remains in the entire area of financial legal relations, which leads to abuse and unpredictability.
Law enforcement practice in Ukraine has already recorded cases of cryptocurrencies being used for illegal purposes, including financing terrorist groups, paying for illegal services and purchasing drugs. The anonymity of cryptocurrency transactions creates additional difficulties for law enforcement agencies in tracking and preventing such offenses.
Ukraine needs to not only take into account international experience in regulating cryptocurrencies, but also develop its own approaches, taking into account the specifics of the domestic market. Improving the legal framework will contribute to economic growth, strengthen the protection of citizens’ rights, and develop innovations in the field of digital financial technologies.
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The content of this article is intended to provide a general guide to the subject matter, not to be considered as a legal consultation.