Ukrainian lawmakers gave the initial nod to a draft law determining the legal status of cryptocurrencies in their country as well as their taxation.
The long-awaited legislation opens the door to regulated crypto investments that will inevitably result in increased budget receipts for the war-torn nation.
Ukraine’s Rada greenlights virtual assets law
The Verkhovna Rada, Ukraine’s unicameral legislature, approved on Wednesday the bill “On Virtual Asset Markets” on first reading.
The law’s provisions aim to legalize cryptocurrencies like Bitcoin and sort out matters related to their regulation, not least the taxation of crypto income.
“246 deputies voted for the adoption of the document,” the crypto news outlet Forklog reported. That’s out of 321 members of parliament present during the session. It’s worth noting that only one rejected the proposal.
According to Bill No. 10225-d , profits received from virtual asset (VA) transactions during a given year must be taxed. The base is the difference between sales revenues and acquisition costs.
Profits from cryptocurrency trading will be included in the total annual taxable income and taxed at 18%, the report highlighted.
A preferential rate of 5% will be offered to investors who chose to convert their crypto holdings to fiat during the first year after the adoption of the law.
Income derived from the exchange between different virtual assets will not be taxed, according to its current provisions.
The same applies to income from the sale of VAs that does not exceed the amount of a minimum wage from the reporting year and to the value of digital coins obtained without payment.
The sponsors of the legislation have tasked the National Bank of Ukraine (NBU) with taking responsibility for the supervision of activities in the country’s VA market.
A second regulator is yet to be determined. That body will be granted broad powers, including to request information from private individuals and legal entities.
The agency will also be authorized to carry out on-site inspections and investigations and gain access to documents. It will also be able to freeze assets, seize property, and confiscate funds.
Ukraine finally moves ahead with crypto regulation
The draft law has more hurdles to overcome, and a number of changes are likely to be made before its second reading in the Rada.
Nevertheless, Wednesday’s vote is a significant step forward for the Eastern European nation that ranks among the world’s top crypto adopters, according to Chainalysis.
Ukraine made its first attempt to regulate crypto in early 2022, but Russia’s full-scale invasion, launched in February of that year, postponed the effort.
Cryptocurrency usage surged in the following years, especially after the NBU imposed financial restrictions to prevent capital flight during the war.
The monetary authority maintains a conservative stance and recently rejected a legislative proposal that would allow it to add crypto assets to its reserves, citing risks for Ukraine’s integration with the European Union.
Amendments were also needed to the country’s Tax Code before the final adoption of the VA law, and the current bill deals with that matter, too.
In April, the parliamentary committee on taxation reviewed the draft and recommended it for first reading in the Verkhovna Rada.
In May, the Office of President Volodymyr Zelenskyy was accused of blocking the consideration of the draft law. Inconsistencies of the proposed legislation with the EU’s Markets in Crypto Assets (MiCA) rules were allegedly the main motive for the move.
Adequate regulation would allow Ukraine to recover up to $10 billion it’s currently losing due to the absence of proper oversight and the spread of crypto-related crime, according to a recent report produced by a leading U.K. think tank.
