Ukraine eyes legalization of digital assets in early 2025

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Ukraine is seeking to legalize digital assets by early 2025, with a draft proposal set to be tabled in parliament within the next few weeks.

According to local reports, a parliamentary working group tasked with exploring digital asset regulations drafted the proposal in partnership with the International Monetary Fund (IMF) and the country’s central bank.

If passed in parliament, the draft would finally legalize digital assets in a country where adoption has soared. According to this year’s Chainalysis adoption index, Ukraine ranked first in Eastern Europe and sixth globally, ahead of Russia, the Philippines, Pakistan, and Brazil. It ranked fifth globally in 2023.

“…the [parliamentary] working group is finalizing a draft law for its first reading. I believe the text, developed in collaboration with the National Bank and the IMF, will be ready after the New Year. We aim to pass this law and legalize cryptocurrency in the first quarter,” Danylo Hetmantsev, who heads the Committee for Finances, Tax and Customs Policy in Ukraine, revealed at a recent event.

The lawmaker noted that the new law would treat digital assets similarly to securities, where profits are taxed after the asset is sold for fiat.

“In consultations with European experts and the IMF, we are taking a very cautious approach to using cryptocurrencies for tax exemptions, as it could potentially facilitate tax evasion in traditional markets,” Hetmantsev added.

On the same day, Deputy Prime Minister Mykhailo Fedorov claimed that legalizing digital assets could unlock 15 billion hryvnia ($360 million) for the Ukrainian economy.

“If the crypto market were legalized, the state could receive about UAH 8.34 billion in taxes from crypto exchanges registered in Ukraine and up to UAH 6.53 billion from personal income taxation,” he stated.

Fedorov, who also doubles up as the Minister of Digital Transformation, revealed that his ministry was involved in drafting the proposed law and is backing it in parliament.

He further called on Ukrainian businesses to adopt digital assets to gain a competitive edge and attract investment from a global pool of investors.

Digital assets became a prominent issue when the Russia-Ukraine conflict started, with both parties reportedly turning to ‘crypto’ to work around challenges in their financial rails. For Russia, digital assets are a viable means to circumvent sanctions. Meanwhile, Ukraine has relied on digital assets to raise funding from its allies and the global community as its local currency and financial systems became stretched by the conflict. Some studies claim that it raised over $225 million in digital assets, including nearly $200,000 in non-fungible tokens (NFTs).

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