Legislation Developments
According to Daniil Getmantsev, head of the tax committee of the Verkhovna Rada (the Ukrainian parliament), Ukraine plans to legalize cryptocurrencies in early 2025. This move is aimed at regulating digital assets while ensuring fiscal oversight and creating a transparent framework for businesses and investors.
Coordination with International Organizations
The draft bill is currently under review and is expected to be finalized by early 2025 in coordination with the National Bank of Ukraine (NBU) and the International Monetary Fund (IMF). This collaboration aims to establish a standardized regulatory approach, ensuring that Ukraine’s crypto policy aligns with global standards.
Taxation Rules
Contrary to industry expectations, there will be no tax breaks included in Ukraine’s crypto policy. The legislation will apply standard taxation rules similar to securities trading. This means that all profits from crypto transactions will be taxed upon conversion to fiat currencies, ensuring that revenue from crypto-related financial activities flows toward the use of the country and its government.
No Tax Incentives
Getmantsev explained that the committee is "cautious about tax incentives as they can be exploited for tax evasion in traditional markets." This cautious approach aims to limit tax avoidance risks while ensuring compliance with international regulations.
Regulatory Framework
The draft legislation will regulate digital asset transactions, focusing on financial stability and Anti-Money Laundering (AML) measures. The planned framework is designed to create a secure environment for businesses and investors working with digital assets.
Benefits of Legalizing Cryptocurrencies
Legalizing cryptocurrencies in Ukraine could offer several benefits, including:
- Access to financial support: Ukrainians can access regulated means to obtain financial aid during the ongoing war with Russia.
- Protection from inflation: Cryptocurrencies can provide a safeguard against inflation, allowing individuals to protect their assets and maintain purchasing power.
- Facilitating cross-border transactions: Legalizing cryptocurrencies can enable smoother cross-border transactions without relying on traditional banking systems, which may face disruptions during wartime.
Cryptocurrency Usage in Crises
Cryptocurrencies have been used for humanitarian aid, donations, and financial stability during crises. The rise of decentralized finance (DeFi) in Eastern Europe also aligns with the planned legislation, as DeFi has received over $499 billion worth of crypto between July 2023 and June 2024.
Comparison to Other Countries
While Ukraine moves to regulate digital assets, other nations are making similar strides. Morocco’s central bank, Bank Al-Maghrib, is preparing a draft law for crypto regulation. The governor of the Moroccan central bank revealed that the "draft law" is currently "in the adoption process." This development coincides with an uptick in Bitcoin interest as it approached $100,000 in late November.
Central Bank Digital Currencies (CBDCs)
Bank Al-Maghrib has also been exploring the possibility of establishing a CBDC to contribute to achieving certain public policy objectives. The implementation of a CBDC can provide a secure and efficient means for transactions, reducing reliance on traditional banking systems.
Conclusion
Ukraine’s plan to legalize cryptocurrencies in early 2025 marks an important step toward regulating digital assets while ensuring fiscal oversight. The legislation will create a transparent framework for businesses and investors working with digital assets, limiting tax avoidance risks. As other countries make similar strides, Ukraine can position itself as a potential hub for regulated digital asset trading in Eastern Europe.
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