The Ministry of Digital Transformation of Ukraine has officially confirmed the legalization of the crypto sector by Ukraine President Volodymyr Zelenskyy as Bitcoin, Ethereum, Dogecoin donations to the country soar past $100 million.
Ukraine’s parliament Verkhovna Rada passed the law that legalized digital assets, including crypto, last month. President Zelensky has now signed the Law “On Virtual Assets”, thus fulfilling the final requirement for establishing the legal status of cryptocurrencies in the country.
The law enables Ukrainian and foreign crypto exchanges to operate legally in the country. Closer government’s monitoring of their activities will be introduced to provide additional guarantees to their clients. In addition, new taxation regulations will allow Ukraine’s government to obtain a stable flow of tax revenues, contributing to higher financial resilience. The law also allows banks and other financial institutions to open accounts for crypto companies, resulting in the better integration of traditional financial and cryptocurrency operations.
Ukraine’s officials suggest the legalization of the crypto sector is a highly important step towards the formation of a developed virtual assets market in the country. Although Ukraine does not recognize Bitcoin and other cryptocurrencies as legal tender, it provides the required legal protection for crypto holders. Ukraine is likely to strengthen its position as one of the major crypto hubs in Europe, thus distinguishing it from other East European countries with more conservative policies.
According to the Global Crypto Adoption Index, Ukraine is ranked first in the world in terms of cryptocurrency use by its population. While the initial adoption of Bitcoin, Ethereum, and other cryptocurrencies was largely driven by high inflation and financial risks present in Ukraine, the recent regulatory changes have created additional stimuli for the development of the crypto market.
In particular, many crypto investors will most definitely be interested in validating their virtual assets while paying comparatively low taxes. Crypto holders from neighboring countries may want to redirect their crypto holdings to Ukraine in the future in order to avoid the economic pressure of their national governments.
If Ukraine’s regulations are effectively enforced, the crypto and financial sectors will enjoy rapid development in the coming months. The plausible short-term effects of this policy refer to the generation of higher fiscal revenues for Ukraine that may be critically important amid its current crisis. The major long-term effects of the Law “On Virtual Assets” include the establishment of a strong crypto market in the country that combines the major productive efforts of private investors, financial intermediaries, banking institutions, and Ukraine’s government.
