Published: Terralex, 21 July 2022
Authors: Yehor Svidlo, senior associate; Alina Ratushna, associate
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According to the Law of Ukraine on Virtual Assets (the “Law No. 2074-IX“), crypto assets are defined as intangible benefits being the objects of civil rights, which have the value, and are expressed as data set in electronic form.
Crypto assets are intangible benefits, which are not a means of payment in the territory of Ukraine and cannot be exchanged for property or services. At the same time, crypto assets are the objects of civil rights, which may be freely transferred from one person to another.
Not exactly. The legislative framework regulating crypto assets in Ukraine consists of Law No. 2074-IX, signed by the President of Ukraine on March 15, 2022. Although Law No. 2074-IX is not yet in force – it will come into force only after adoption of amendments to the tax legislation on the taxation of transactions with crypto assets.
The key regulatory authorities responsible for the regulations and crypto assets enforcement in Ukraine are the following: the National Securities and Stock Market Commission and the National Bank of Ukraine. These authorities carry out their activities within their powers defined by Law No. 2074-IX.
In particular, the National Securities and Stock Market Commission:
- formats and implements state policy on development of the crypto assets market, promotes the adaptation of legislation on crypto assets to international standards;
- interacts with other state authorities on the functioning of the crypto assets market in Ukraine;
- promotes the development of the crypto assets market;
- implements state regulation and control over the turnover of crypto assets;
- protects the rights of the market participants;
- ensures and exercises control over AML requirements;
- generalizes the practice of application of the legislation on virtual assets in Ukraine, develops proposals for its improvement;
- carries out financial monitoring.
In turn, the National Bank of Ukraine:
- develops proposals for the improvement of laws and other regulations on the turnover of crypto assets;
- carries out international cooperation;
- issues, cancels, reissues permits for the provision of services related to the turnover of crypto assets;
- determines the list of currency values which can secure the crypto assets, and for which the crypto assets may be exchanged;
- approves the rules of exchange of crypto assets secured by the currency values and establishes the relevant restrictions;
- supervises the activities of service providers, conducts inspections, and applies sanctions;
- determines the requirements for cyber security related to the turnover of crypto assets secured by the currency values secured by the currency values.
Yes. Law No. 2074-IX provides the introduction of a register of providers of services relating to crypto assets circulation. This register is designed as an anti-money laundering measure which will identify “gray” crypto assets. Moreover, crypto asset transfers will be subject to financial monitoring.
Despite the legalization of crypto assets in Ukraine, blockchain technologies are not regulated in Ukraine. Law No. 2074-IX does not contain such a concept as “blockchain”.
At the same time, at the beginning of 2018 Ukraine became one of the top ten countries where blockchain is used at the state level.
Also, there are organizations in Ukraine which are working on these issues. In particular, such an organization is the Blockchain Association of Ukraine. This non-profit organization has fostered the integration of blockchain technology into Ukraine`s economy since 2014 and continues to work on this issue now.
Unfortunately, as of today the Ukrainian legislature has not adopted amendments to the tax legislation on taxation of transactions with crypto assets. According to the current legislation, income from transactions with crypto assets is taxed due to the general rules – the entire amount of income received by a person from transactions with crypto assets is subject to taxation. The crypto assets themselves are not taxable in Ukraine.
In Ukraine, crypto assets are recognized as intangible benefits – a type of object of civil rights. The status of crypto assets as property is established only by Law No. 2074-IX. So far, the Civil Code of Ukraine does not provide rules that regulate the features of such a benefit as crypto assets.
According to Law No. 2074-IX, there are four cases in which Ukrainian legislation is applicable instead of the law of any other country: (1) parties of crypto assets’ legal relations are registered or have a permanent establishment in Ukraine; (2) parties agreed to apply Ukrainian law to crypto assets relations; (3) both parties of crypto assets’ legal relations are residents of Ukraine; (4) the acquirer of the crypto assets is a resident of Ukraine.
No, according to Law No. 2074-IX smart contracts transferring ownership in crypto asset are not treated as legally binding in Ukraine.
No, Law No. 2074-IX does not establish special mechanisms that make it possible to take security over a crypto asset in Ukraine. However, it is possible that security mechanisms will be provided further.
No, because the issue of taxation of transactions with virtual assets is currently unregulated in Ukraine.
Yes, there is forthcoming legislation relating to crypto assets. Since March 13, 2022, the legislature is working on a bill No. 7150, which provides rules for the taxation of transactions with virtual assets. This is the only bill relating to crypto assets which is registered in the legislature for further consideration.
Ukraine has not signed any international treaties on crypto assets. Simultaneously, according to Ukrainian law, if an international treaty, agreed to and binding by the legislature, establishes rules other than those provided by Ukrainian law, the rules of international treaty shall apply. Crypto assets legislation is not an exception to this rule.
In Ukraine, crypto assets are regulated by both local laws and international rules, whichever have higher legal force.
The peculiarity is that the Ukrainian legislation in this area is still in the process of creation. In fact, as of today the only legislative framework regulating crypto assets in Ukraine is Law No. 2074-IX, which has not entered into force. We are currently awaiting changes to the tax legislation. It would appear that the legislature will further create a regulatory framework in this area. However, the legislative activity in this direction is complicated by the war against Russia.