Ukraine passes law giving digital currency legal status

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Ukraine has passed a draft bill that recognizes and implements regulations for the digital currency industry. The new law affords protection to virtual asset owners and allows companies offering digital currency services to open bank accounts.

Ukraine’s parliament, known as the Verkhovna Rada, almost unanimously passed the bill last week, finally giving legal status to digital currencies in the Eastern European country. Known as the bill “On Virtual Assets,” it defines virtual assets as intangible assets expressed in the form of electronic data. It also defines digital currency wallets and private keys.

The new bill is headed to the country’s president, Volodymyr Zelensky who will then sign it into law. 

Ukraine has become a global powerhouse in the digital currency space in recent years. According to the Chainalysis Global Crypto Adoption Index 2021, it ranks fourth globally in overall adoption. Last year, it had ranked first and was the only country with a perfect score of 1.

However, despite this growth, digital currencies have existed in a legal grey area. Ukrainians have been left free to acquire and own digital currencies. For the businesses, the narrative has been different, as per a report by a local paper the Kyiv Post.

Authorities have reportedly taken a combative stance against the industry, raiding virtual asset companies at will and even confiscating expensive and critical equipment without any grounds. These businesses have also found it quite difficult to access basic banking services, much like in many other countries.

While digital currencies will now have legal standing, they are still not recognized as legal tender, a preserve of the local hryvnia currency. Ukraine has taken a page out of its neighbor Russia’s regulatory book where payments through digital currencies are strictly prohibited.

The new bill gives the Ministry of Digital Transformation jurisdiction over the digital currency industry. Commenting on this, the Ministry stated that the new bill will open new opportunities for businesses in the country and contribute to the tax coffers.

Minister Mykhailo Fedorov told the Kyiv Post, “Only a few countries in the world have legalized crypto assets—Germany, Luxembourg, Singapore. Ukraine will be one of them. […]Favorable conditions will allow companies to register in Ukraine, rather than abroad. The entrepreneurs will pay taxes to the budget, but will be protected by the state.”

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