Two bills at once on taxation of operations with virtual assets and market regulation, suspension of services by banks in hryvnia operations with bitcoin exchanges and leading positions in the adoption of digital currencies — publication Encrypted analyzed the crypto sector of Ukraine for 2023.
The number of cryptocurrency users in Ukraine is growing. For example, the head of the CEE and Central Asia region of Binance, Kyrylo Khomyakov, noted that in 2023, the number of clients of the exchange in the country increased by 26%, and the Trustee Plus team announced in September that the number of active users of the application in Ukraine exceeded 100 people.
The community was also actively developing. In July, a large-scale Encrypted Conference was held in Kyiv, which gathered more than 1000 people, including representatives of business and regulators.
At the same time, Chainalysis analysts indicated a decrease in the volume of cryptocurrency transactions for the year:
"In Ukraine, in our opinion, the decrease in volumes is largely due to the economic difficulties caused by the war, as well as the migration of many Ukrainian residents and businesses, including cryptocurrency platforms, to other parts of Europe."
Suspension of operation of crypto exchanges with hryvnia through Ukrainian bank cards
At the beginning of March 2023, several cryptocurrency platforms immediately announced the temporary suspension of operations with hryvnia bank cards in Ukraine.
Later, information appeared that the blocking was due to the authorities' fight against gambling and tax evasion of this business.
"In connection with the recent restrictions, fiat channels, namely input and output through a bank card and other payment services, were stopped throughout Ukraine. This decision is related to the fight against illegal business and, unfortunately, also affected cryptocurrency exchanges." Binance said.
By the end of the year, the restriction has not yet been lifted. The Digital Ministry emphasized that due to the suspension of fiat gateways with service providers, the crypto sector in Ukraine is in a state of stagnation. To solve the problem, it is necessary to adopt the regulation of the segment "as soon as possible," the ministry said.
What exactly it will be is still unclear. The previously adopted law "On Virtual Assets" has not yet entered into force. This will happen only after the approval of changes to the Tax Code in terms of transactions with cryptocurrencies. And in November, the Verkhovna Rada registered two options for taxation and market regulation at once.
Two views on one market
In August, the Verkhovna Rada adopted a bill on digital assets. In particular, virtual assets are recognized as the last.
For users, this means getting the opportunity to protect the rights to their cryptocurrencies — to pass them on as an inheritance, to contact law enforcement in case of theft of digital assets, etc.
The new definition of virtual assets is also included in the bills regulating the market. Two of them were introduced in 2023. The first, draft law No. 10225, was submitted to the Verkhovna Rada on November 7.
It provides for amendments to the law "On Virtual Assets", already adopted in 2022, and also prescribes the taxation of transactions with cryptocurrencies.
In particular, the document proposes the introduction of a tax rate for individuals on income from such transactions of 18% personal income tax and an additional 1,5% military levy. The bill also makes exchanges tax agents of their clients.
This document is a modified version of the already adopted 2022 law "On Virtual Assets". It was decided to change the latter in connection with the approval of the MiCA regulation in the EU.
According to the approved law "On Virtual Assets", the main regulator of the industry in Ukraine is the National Commission for Securities and the Stock Market (NCSCFR). The latter consulted with a team of Ernst&Young auditors for the implementation of MiCA norms in Ukrainian legislation and created an advisory board to discuss the implementation of virtual assets.
However, the very initiative of synchronizing market regulation norms in Ukraine with MiCA did not meet with unanimous support from the very beginning. Thus, the Ministry of Digital Affairs stated that full implementation of the provisions of the European regulation at this stage is not only unnecessary for the country, but may also harm the process of legalization.
According to the Ministry of Digital Transformation, the bill submitted on November 7 "will not allow the market to launch." As a result, 10 days later — on November 17 — a second, alternative document was submitted to the Verkhovna Rada. It was developed by the Ministry of Digitization team together with business representatives.
It proposed a gradual increase in the rate for income from transactions with cryptocurrencies: 5% for the first three years, 9% for the next five, after that - a total tax rate of 18%. The draft law also proposes to exclude the NKCPFR from the main market regulators.
Cryptodonats
In February 2023, the UACatsDivision team, together with UNITED24 and Incrypted, launched the first national NFT collection with images of the heroes of the Armed Forces of Ukraine. All funds collected from the sale will be used to purchase combat naval drones.
As of February 26, 3 NFTs were sold as part of the initiative and more than 509 million hryvnias were received.
However, it is worth noting that in 2023, the trend of decreasing cryptocurrency donations to Ukraine against the background of the aggressive invasion of the Russian Federation continued. To a large extent, this is explained by the fact that in the first months after the start of a full-scale war, crypto-assets were in fact the only fast and effective channel of support for Ukrainians and the army in the conditions of the restrictions of the National Bank.
Law enforcement officers and cryptocurrencies
In 2023, employees of Ukrainian departments and law enforcement structures underwent several trainings on working with blockchain analysis tools and tracking cryptotransactions.
Thus, specialists were trained by representatives of the US Tax Service, the Fiscal Information and Investigation Service of the Netherlands and the Tax and Customs Service of Great Britain, the OSCE and the UN, as well as Crystal Blockchain analysts.
The Agency for Search and Asset Management of Ukraine, together with other agencies, announced the development of a procedure for managing confiscated virtual assets.
To always be aware of the most important things, read us at Telegram
