The legal status of cryptocurrencies remains a mixed bag of regulatory stances, depending on the jurisdiction under consideration. Although some countries have turned to comprehensive bans or strict supervision, other countries have chosen to adopt a more open approach to encryption.
For Ukraine, the latter seems to be the case, and the government encourages legalized encryption businesses within the country. Ukraine’s seemingly positive stance on cryptocurrencies also contrasts sharply with neighboring Russia, where Russian officials are setting up regulatory barriers to the ownership and use of digital currencies.
While Ukraine has promulgated laws to recognize and regulate cryptocurrencies, the country’s central bank is also working hard to develop its own national digital currency. Central Bank Digital Currency (CBDC) projects have become very popular around the world, usually in response to the surge in cryptocurrencies.
As we all know, some countries with CBDC plans, such as China and Nigeria, have passed anti-encryption regulations. Global financial organizations such as the Bank for International Settlements also call on countries to use CBDC to curb the spread of “private” cryptocurrencies.
Draft of the Virtual Assets Law
In early September, Cointelegraph reported that the Ukrainian Parliament Adopted the “Draft Law on Virtual Assets”. “The legislative action means that the country officially recognizes cryptocurrency.
According to a news released by the Ministry of Digital Transformation of Ukraine on September 8, the draft law passed by the legislature is based on the encryption regulatory standards established by the Financial Action Task Force (FATF). Therefore, the guidelines contained in the new regulations require compliance with anti-money laundering agreements.
When commenting on the passage of the draft bill, Oleksandr Bornyakov, Deputy Minister of Digital Transformation of Ukraine, told Cointelegraph that government regulation is a necessary step for the growth and maturity of any emerging industry, adding:
“The establishment of a virtual asset policy in Ukraine will create a legal space for Ukraine and the international VASP to officially register its business. Given the huge potential of Ukraine as one of the leading countries in the virtual asset field, this is also very important. Therefore, Ukraine clearly needs to adopt cryptocurrency. “
Bornyakov’s department will be responsible for implementing cryptocurrency regulatory policies throughout Ukraine. The Ministry of Digital Transformation will also work with the Central Bank to help monitor the circulation of cryptocurrencies in the country.
In a conversation with Cointelegraph, Lucia della Ventura, Legal and Compliance Manager of Ledgermatic, a financial technology expert, commented on the legalization of Ukrainian cryptocurrency and pointed out: “The main purpose of the Ukrainian Act is to provide a safe space for the introduction of Bitcoin and the Other cryptocurrencies in the country, these currencies now have legal definitions and rules that determine their use.”
According to della Ventura, passing the bill will provide legal certainty for crypto companies in Ukraine, adding:
“With the approval of this law by Parliament, individuals and companies are fully protected because the bill provides more clarifications on financial matters and officially allows cryptocurrency companies to operate in the country.”
Legalization of cryptocurrency transactions in Ukraine
With the draft law passed only in the second reading, Ukrainian lawmakers have effectively initiated the legalization of the country’s crypto market, which has previously existed in a regulatory “grey area”. By identifying cryptocurrencies, exchanges and other virtual asset service providers (VASP) can now establish banking relationships with Ukrainian commercial banks.
Access to banking services may incentivize foreign crypto companies to open stores in Ukraine. Ukrainian Deputy Prime Minister and Minister of Digital Transformation Mykhailo Fedorov stated that this situation may help transform the country into a center of cryptocurrency and blockchain technology.
“Soon, foreign and Ukrainian services related to the circulation of virtual assets, especially cryptocurrency exchanges, will be able to officially operate within our jurisdiction,” the digital transformation announcement stated.
Bornyakov said that the interaction between banks and crypto businesses will open up new opportunities for the Ukrainian people, especially in the field of digital finance. As quoted in the September 8 announcement, the Deputy Minister of Digital Transformation of Ukraine stated that the legalization of cryptocurrencies will become a “powerful driving force” for the further development of the country’s cryptocurrency space.
“We believe that the virtual asset market can start Ukraine’s digital economy,” Bornyakov told Cointelegraph, adding:
“Even on a global scale, the Ukrainian virtual asset market is already quite developed and huge. The development of the virtual asset industry is one of the top tasks of the Ukrainian government. Therefore, we strive to create a truly favorable regulatory and taxation framework for the development of crypto businesses in Ukraine. .”
Foreign cryptocurrency exchanges operating legally in Ukraine may also be a positive factor in attracting foreign investment into the country’s digital economy. With the emergence of stricter regulatory guidelines in multiple jurisdictions, Ukraine’s recognition of digital assets may promote the entry of cryptocurrency businesses into the country.
According to reports, VASPs wishing to establish operations in Ukraine under the new regulatory paradigm must provide information about their ownership structure. In fact, only owners with “impeccable business reputation” can be allowed to operate crypto-based companies in the country.
In August, the Ukrainian Security Service shut down a secret cryptocurrency exchange network believed to have been involved in illegal financial activities since the beginning of 2021. According to reports, these platforms transfer funds from banned Russian payment processors such as Yandex, WebMoney and Qiwi.
The Ukrainian authorities are also keen to let these VASPs create internal financial control agreements to ensure compliance with anti-money laundering policies.The central bank also expressed its commitment Promote fair encryption regulations in the country.
In an official statement from the National Bank of Ukraine (NBU), the central bank of the country stated that it plans to focus on encryption regulations. As part of the document, NBU recognized the promising opportunities provided by cryptocurrencies, especially in the payment market.
With the parliament’s recognition of cryptocurrency, NBU stated that it will monitor the risks associated with the rapid proliferation of the country’s digital currency, with special attention to stablecoins. In fact, stablecoins have become an important subject of regulatory review in many countries/regions, including the United States.
Bitcoin: no middle ground
Attitudes towards Bitcoin (Bitcoin) And general government cryptocurrencies seem to be turning to absolute-for or against-as far as state actors are concerned, subtle positions are in danger of extinction. Although it is not in the same category as El Salvador’s Bitcoin law, Ukraine’s legalization of cryptocurrencies makes the country one of the few countries that have passed laws to promote the adoption of digital currencies within its borders.
According to reports, the Central Bank of Ukraine also Plan to issue CBDC, The move to legitimize cryptocurrency runs counter to the regulatory route taken by other countries with active sovereign digital currency projects. Although China has long established strict encryption control policies and banned transactions and token fundraising as early as 2017, once its digital RMB project began to enter the public testing phase, Beijing seemed to increase its bets on the crackdown on cryptocurrencies. .
The People’s Bank of China (PBoC) has repeatedly stated that its digital currency electronic payment project is a direct response to privately issued cryptocurrencies. In fact, the People’s Bank of China joined the ranks of central bank governors, who warned that the Diem project supported by Facebook may subvert the sovereign monetary policy control agreement.
The middle-tier regulations related to cryptocurrencies seem to be disappearing quickly, and countries fall into one of two extreme categories when dealing with cryptocurrencies. El Salvador’s adoption of Bitcoin as legal tender has been touted as the inspiration for similar actions taken by other countries in Central and South America.
In early September, the Central Bank of Cuba promulgated cryptocurrency regulations Take effectTherefore, cryptocurrencies are now available for investment and commercial transactions in Cuba, and exchanges and other VASPs belong to the new licensing system.
In Ukraine, the country’s Ministry of Digital Transformation is already studying possible early use cases of digital hryvnia CBDC. Fedorov has already presented arguments for using the proposed CBDC to pay the employees of the ministry.
As early as August, the country’s deputy prime minister stated that using digital hryvnia to pay government workers’ salaries would be a suitable pilot program for CBDC. According to Fedorov, such a test route will provide controlled use cases and a more suitable pilot program for the digital currency, rather than a public beta launch.If this measure is passed, Ukraine will work with China and other countries to use Salaries of government workers As a testing ground for CBDC deployment.
As policymakers from governments and international financial regulators support anti-encryption sentiment, industry groups and alliances are also working to promote better dialogue on important issues. It has become common for blockchain organizations to release policy toolkits to help legislators and regulators better understand the cryptocurrency industry.
Critics of strict measures against cryptocurrency regulation say Such measures will stifle digital innovation, Forcing the company to move its business to other places. Countries like Ukraine that are developing fairer regulatory policies may benefit from restrictive encryption laws enacted in the United States and Europe.