Ukraine legalizes digital currencies as it prunes market regulators

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Digital currencies are now officially legal in Ukraine. The country’s parliament has passed a bill that paves the way for regulating and managing digital currencies in the Eastern European nation. It has also reduced the number of agencies overseeing the industry as it seeks to make it easier for digital currency related companies to operate in the country.

Ukraine’s parliament, known as the Verkhovna Rada, approved amendments to the country’s bill on virtual assets on Thursday. Rada voted 272 out of 365 in favor of the amended bill, which finally makes Bitcoin legal in a country that has seen immense adoption in recent years.

The passing of the bill is the culmination of the legislative process that has taken close to two years, after the bill on virtual assets was introduced to the Rada back in May 2020. It proposed creating an entirely new regulatory body to oversee the industry. 

In September 2021, it was approved by parliament, but President Volodymyr Zelensky vetoed it, saying that Ukraine couldn’t afford a new authority just for digital assets. He sent the bill back to parliament, and after the amendments, it has finally passed.

In its new state, the bill doesn’t recognize Bitcoin as legal tender. However, it gives it legal recognition and backing, which according to the Ministry of Digital Transformation, will provide market participants the assurance and protection they have long sought.

“This will legalize crypto exchangers and cryptocurrencies, and Ukrainians could protect their assets from possible abuse or fraud,” Mykhailo Fedorov, the Minister of Digital Transformation, commented.

“Market participants will receive legal protection and the opportunity to make decisions based on open consultations with government agencies,” he added.

While the Ministry praised the passing of the bill, it was one of the casualties of the bill’s regulatory pruning. Previously, three agencies had been put in charge of the sector, with a fourth one proposed. However, with the amendments, the Ministry of Digital Transformation was dropped.

Moving forward, digital currency owners in Ukraine will be regulated by the National Bank of Ukraine and the National Securities and Stock Market Commission of Ukraine. The former will deal with digital currencies backed by currency valuables, while the latter will be in charge of virtual asset service providers (VASPs), derivative trading, and other similar aspects.

This could be beneficial to the market as it cuts down the red tape that VASPs will have to navigate to serve Ukrainians, Oleksandr Bornyakov, the Deputy Minister at the Ministry of Digital Transformation, said.

Speaking to one news outlet, he said, “Shrinking regulatory bodies can actually significantly accelerate crypto market launch. In order to ensure the growth of the crypto industry we are ready to cooperate with The National Commission on Securities and Stock Market. Ultimately, real change in any market is driven by collaboration.”

Bornyakov has been pro-Bitcoin for quite some time now. He envisions Ukraine being one of the top Bitcoin destinations in the world, touting it as the future. He was also critical of proposals by neighboring country Russia to ban digital currencies. 

“Our positive stance on crypto indeed stands in contrast with neighbors where officials propose a ban on the use and mining of cryptocurrencies. I’d like to remind them crypto regulation will work better than a ban,” Bornyakov told Fortune. 

President Zelensky is expected to sign the bill into law and publish it within the next ten days, Konstantin Yarmolenko from Blockchain4Ukraine said.

Even before the positive regulations, Ukraine was already among the world’s leaders in digital currencies. According to the Chainalysis Global Crypto Adoption Index 2021, the country only ranks behind Vietnam, India, and Pakistan globally for adoption. 

According to the New York Times, digital currency trading volume exceeds fiat volume in Ukraine. Ukrainians trade $150 million on average each day, more than the volume of interbank exchanges in fiat currency. 

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