Lawmakers in Ukraine have given the official nod to create a draft law that will determine the legal status of digital assets in their country, as well as taxation efforts. The long-awaited legislative efforts open the door to regulated crypto investments, which will result in increased budget receipts for the country.
The Verkhovna Rada, Ukraine’s unicameral legislature, approved on Wednesday the bill “On Virtual Asset Markets” on first reading. The law includes provisions 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,” a news outlet reported. The figure is out of the 321 members of parliament present during the session. Notably, only one person rejected the proposal.
Ukraine lawmakers move to legalize crypto
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 choose 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 being determined, with the body expected to be granted broad powers, including the ability to request information from private individuals and legal entities. The agency will also be authorized to carry out on-site inspections and investigations, giving them access to documents. In addition, it will also be able to freeze assets, seize property, and confiscate funds. 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.
Kyiv to benefit from crypto regulation
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 are also needed in the Tax Code of Ukraine before the final adoption of the VA law, with the current bill dealing with that aspect too. In April, the parliamentary committee on taxation reviewed the draft and recommended it for first reading in the Verkhovna Rada. 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 UK think tank.
