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On March 15, President of Ukraine Volodymyr Zelensky signed the law “On Virtual Assets”. Publications about this event were accompanied by messages from Ukrainian officials about financial support for Ukraine, which comes from all over the world, including in cryptocurrency. Therefore, many commentators were quick to point out that the adoption of the law was caused by the desire of the Ukrainian authorities to get as much help as possible in a growing market.
However, the funds received by the Crypto Fund of Ukraine – $ 54 million in three weeks – are almost two orders of magnitude less than the assistance provided by international financial organizations and governments.
Ukrainian legislation has not previously prohibited ordinary citizens from owning cryptocurrencies, and the preparation of the law “On Virtual Assets” began in mid-2020, long before the Russian invasion of Ukraine.
Over the next year and a half, the bill went through a lengthy approval process, up to a presidential veto and re-adoption by parliament, which took place on February 17, that is, a week before the outbreak of hostilities.
The main contradictions between the parliamentary and presidential options are the powers of the regulators of the crypto sector. The deputies wanted to distribute them between the government, the National Bank (NBU), the National Commission for Securities and Stock Market (NKTSBiFR) and a new body – the National Service for Regulating the Turnover of Virtual Assets.
However, the president did not create a new service, crossed out the government from the list of regulators and gave the powers to the NKTSBiFR and the NBU. It is understood that the National Commission should deal with crypto-exchanges and other intermediaries for the exchange of digital assets, and the National Bank should deal with account holders.
Ideally, after the law goes into effect, Ukrainians will be able to have cryptocurrency in bank accounts and dispose of it as freely as other assets. But before this happens, the NKTSBiFR and the NBU must prescribe a regulatory framework that takes into account the requirements of financial monitoring and compliance.
The basic regulation on financial monitoring in force in Ukraine considers any transactions with cryptoassets suspicious, so their owners will have to prove the legitimacy of acquiring these funds.
As Deputy Minister of Digital Development Alexander Bornyakov said earlier, the requirements of international law KYC / AML (Know Your Customer / Anti-money laundering – “Know your customer” and “Fight against money laundering”) will be extended to crypto exchanges, custody services, custodian crypto wallets and other crypto service providers.
This means that they will not only be required to disclose all data about their beneficiaries and sources of capital, but also, as subjects of primary financial monitoring, to monitor suspicious transactions, stop them and report them to the competent authorities.
Another set of questions concerns the taxation of digital assets, which are much more volatile than conventional ones. Without compliance with all these requirements, the cryptocurrency will not be widely used in Ukraine.
Needless to say, the current situation is by no means conducive to the introduction and testing of a new regulatory framework for the country. Therefore, until the end of the war with Russia, Ukraine is unlikely to become a Mecca for holders of digital assets. Well, what will happen next – we’ll see.
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