Ukraine’s Digital Ministry Legalizes Crypto Trading and Spending for Its Citizens

East European country Ukraine has initiated key measures allowing crypto-related activities for its citizens.

The deputy minister of Ukraine's Ministry of Digital Transformation, Oleksandr Bornyakov, affirms that the residents of Ukraine will be able to legally keep, exchange, and spend cryptocurrencies along with native currency virtual Hryvnia once the new virtual assets law is adopted.

In December, the first reading in the Verkhovna Rada, Ukraine's parliament, voted for a new virtual asset bill. It will also introduce investor protection and will enable them to exchange and declare their crypto holdings legally. This allows payments in cryptocurrencies in spite of not recognizing crypto as legal tender. 

On 6 Aug, Friday, in an interview with local financial publication Minfin, Bornyakov said that the legislation would make virtual assets "a completely legal and common phenomenon for the government and the society." He also added that he is confident that it would be "quite legal to pay with cryptocurrencies" in Ukraine only through payment intermediaries providing instant conversion to Ukrainian Hryvnia.

He added, "Today, the legislation in Ukraine also does not allow you to pay in dollars, but you can easily pay for purchases with a dollar card. Currencies are converted instantly during payment."

The draft on virtual assets is under preparation in the parliament for its second reading. It was revised earlier, and in June, the parliamentary Committee on Digital Transformation recommended its final adoption, despite objection from regulators in Kyiv. Later, in June, the government and business representatives revealed the ground plan to integrate cryptocurrencies into the country's economy within the next three years.

Oleksandr Bornyakov also stated that cryptocurrency exchanges would have to obtain permits from the National Service for Regulation of Virtual Assets (NSVA) to operate in Ukraine. It will be a completely independent state body.

"They will not need a license, but a work permit in Ukraine. This is a simpler procedure than licensing. The conditions for obtaining a permit will not be difficult; you will not have to register a legal entity in Ukraine. The main thing is to prove that there is the necessary amount of capital, and there are no people from the sanctions lists among the founders."

Bornyakov understands that the business related to virtual assets are global. Thus, any strong measures for registration in Ukraine will discourage crypto exchanges from entering the country.

In support of the whole movement, the Ukrainian government also clarified that crypto transactions are not subject to VAT. However, only the difference between their purchase and sale values is taxed. They have proposed the tax rate for individuals be reduced from 19.5% to 5%. 

The National Bank is working on the introduction of digital hryvnia. The country's own central bank digital currency (CBDC). This creates the opportunity to use intelligent contracts and enable transparent transactions. NBU and Journalists will be able to monitor government spending through simplified blockchain technology.

When asked whether the new VA bill talks about the need to control mining, Bornyakov responded by saying, "we believe that this is a completely legal activity now and does not require additional regulation."