Blockchain4Ukraine: what the crypto regulation in Ukraine will look like
Cryptocurrencies in Ukraine still remain in the grey zone. There is, however, a chance of their partial legitimisation by the new government, or at least of key terms of the crypto industry. And everyone can speed up that process.
Despite the active expansion of the
crypto community and an increase in the number of blockchain companies, transactions with crypto assets in Ukraine are still outlawed. Last year, there were two attempts to integrate cryptocurrency regulation in legal framework, but in the end, none of the bills was passed.
The newly-elected deputies of the Verkhovna Rada together with the executive branch, namely, the Ministry of Digital Transformation and the inter-factional association of deputies Blockchain4Ukraine, which includes 50 parliamentarians, decided to change the situation.
In order to determine the development vector of the future legislative framework and discuss the main issues of crypto regulation, an open meeting of the blockchain community was held on October 7 in Kiev. It was attended by MPs, officials from the National Bank and the State Financial Monitoring, as well as lawyers and business representatives.
At the moment, according to MP Alexei Zhmerenetsky, the primary task of lawmakers is to determine the terminology of blockchain and cryptocurrencies, a description of the procedure for tokenising assets, and also solving the issues of introducing blockchain technology into government registries.
At the same time, the parliamentarian has bad news for those who are not used to paying taxes. Most likely, no preferential tax-free 10-year period in Ukraine is not expected, but whether it will be a tax on income or on
exchange transactions is unknown yet.
“I don’t see the possibility of lowering tax rates lower than those established for FLP, FLP is a Ukrainian offshore instrument and it’s not possible to find anything more profitable,” says Zhmerenetsky.
According to him, it is also necessary to determine terms for assets tokenisation on the blockchain so that public and private enterprises can sell micro-shares of their companies and place them in the form of digital IDs.
Revenues and investments for the state
The Ministry of Digital Transformation is confident that the new legislative framework should bring revenue to the state. Nestor Dubnevich, co-founder of Legal Startup Legal Nodes, agrees with that.
Japan, after attracting foreign crypto exchanges, increased its GDP by 2%. Asset tokenisation is also one of the tools to attract investment into the state. Therefore, there is great potential in the legislative work that is being done now,” believes the lawyer.
In addition, according to the expert, the implementation of the blockchain in the land cadastre of Georgia increased the level of confidence among foreign investors in this market and attracted new investments to the state.
In addition to government issues, the problems of business representatives also remain relevant. According to Igor Samohodsky, the head of the ICT sector in BRDO, crypto entrepreneurs still have problems with banks and payments transparency, as well as the problem of taking into account cryptocurrency assets. Moreover, there are requirements of international regulators that also need to be implemented.
“It is necessary to ensure financial monitoring, there are FATF recommendations and we cannot ignore them. It must be done before the next year. We also need to become a competitive country for the international market, ”says Igor Samohodsky.
The expert emphasises that in order to create effective regulation, it is necessary to organise several diverse working groups. Let’s say one group works on taxation issues, the other one - on the use of blockchain in registries, and the third one - on FATF recommendations. It’s necessary in order to work out a unified solution on all individual issues.
In turn, the deputy head of the Ministry of Digital Transformation, Alexander Bornyakov, promised to create a department within the department that will supervise individual working groups and publicly record the achievements of each of them.
Investor rights protection and opening companies by non-residents
Representatives of the National Bank of Ukraine voiced their vision of the future cryptocurrency market.
“We need regulation of market behaviour. In those countries where crypto regulation has become possible, there are already established economies with established institutions. There, the licensing and conduct of the
ICO is the responsibility of the body that regulates market behaviour. There should be clear rules for informing the consumer about possible risks, because without that the rights of consumers and investors could be infringed,” explains Mikhail Vidyakin, the head of the NBU’s Strategy and Transformation Department.
Also, according to the expert, the concept of crypto-regulation and its strategy should be developed and it should be clear for all participants. It will determine the place of crypto assets in the development of the financial market of Ukraine.
In addition to consumer protection rights, the issue of how to ensure the quick opening of a company to non-residents is also relevant. At the moment, in order to get a tax payer number, foreigners are required to be present in the SFS, in person, which reduces the attractiveness and convenience of our country for doing business.
According to the deputy head of the Ministry of Digital Transformation, there is already a separate working group that is working on creating a service for remote business registration for non-residents. It will be carried out on the basis of the FLP, so that everyone can choose the type of activity he needs and open an account. As for the launch dates, the Ukrainian version of e-residence can already start as a beta version by the end of this year, says Alexander Bornyakov.
Also, according to him, there are plans to revive the stock market on the basis of the blockchain, which however will not happen soon.
“The Ukrainian Stock Exchange is dead. Ideas were already discussed to revive it, and not in a classic way, but with the help of asset tokenisation, in a way so that the state would help to place shares in its companies. This will happen in a few years, because for now it is necessary to manage the issue of taxes,” says Bornyakov.
Also at the meeting, was raised the issue of free economic zones and technological industrial parks reincarnation, which could contribute to the development of blockchain technologies in Ukraine. It is still unknown whether these ideas will be implemented.
Blockchain4Ukraine members are expected to sign a memorandum of understanding and cooperation in a few days. It could be a new starting point in the development of the blockchain industry in Ukraine. It is worth noting that from previous attempts to resolve cryptocurrencies, the new team is improved since there are coordinators in all working groups, who will be represented by the governmental officials.
The effectiveness of this solution will be seen in the near future, since it is not only about introducing the concept of cryptocurrencies into the legal field, but also about large-scale system reforms. In the meantime, there is a feeling that the parties are really focused on the result and are ready to consider all initiatives. At the moment, any person from the crypto industry can join the discussion and become a co-author of the future bill.