Cryptocurrency Market in Ukraine
Not long ago, CoinsPaid Media received a curious email from Nikolay Shevchenko, a reader from Kyiv:
“You published news about the number of crypto users in Africa, and I saw an interesting statistic there. According to you, 15.72% of the Ukrainian population owns crypto. Is that really true? Of course, I heard that Zelensky legalized cryptocurrencies, but does that actually mean I can use cryptocurrency in the country without restrictions?”
We hasten to note that CoinsPaid is an international company and some employees reside in Ukraine. So, to satisfy the reader’s interest, we decided not just to talk about the cryptocurrency market in the country but also to ask our colleagues from Ukraine about their personal experiences of owning and using cryptocurrencies.
Until 2021, there was no legislation regulating the crypto market in Ukraine. Only a few domestic legislative acts partially touched on digital asset regulation. For example, the Law On Prevention of Corruption obliged citizens to include crypto-assets in their tax declarations. However, the lack of a legal framework doesn’t mean that crypto was banned in the country and no one used it. Back in 2014, CoinsPaid CEO, Max Krupyshev, (a Ukrainian, by the way), founded the Bitcoin Foundation Ukraine (BFU) public organization together with local crypto enthusiasts.
“We started negotiations on the creation of crypto market legislation in order to conduct business legally,” says Krupyshev. At the same time, Max’s initiative made it possible for Kyiv residents to use cryptocurrency to pay at the “Ziferblat” center.
“People visiting this place could transfer Bitcoin to FruitWallet by simply scanning a QR code. But at that time, the owners didn’t understand what they needed to do with the received cryptocurrency, so I offered to buy back their BTC. Unfortunately, there was no demand to pay in crypto at all, and they stopped accepting payments in a couple of months,” shares Max.
According to research by Chainalysis, Ukraine was 13th in terms of crypto revenue in 2021, with a value of $2.8 billion, which means that Ukrainian crypto investors had about 2% of the global market return. Moreover, Max Demyan, Advisor to the Ministry of Digital Transformation of Ukraine, said that crypto turnover in the country in 2021 was about 1 billion UAH (~$27 million) per day.
Yet another study showed that Ukrainians send 87% of cryptocurrencies to foreign addresses, and only 13% of transactions occur within the country. This situation prompted officials to develop a legal framework for the fast-growing domestic market. First and foremost, it was an attempt to keep investment flows within the country.
“Cryptocurrencies in Ukraine were definitely in circulation already in 2017. I had to open a wallet back then to accept a transfer from an anonymous acquaintance from an SEO forum,” Evgeny Tarasov, News Editor at CoinsPaid Media, shares his personal experience of using cryptocurrency.
“He refused to send the transfer to a bank card because he didn’t want to disclose any data. It was about $40, and he insisted on BTC. Google helped me find a trustworthy site where I could create a wallet for bitcoins. It took me around ten minutes to open a wallet and another ten minutes to get the BTC in question into my account. Next, I had to face the tough choice of selecting an e-currency exchange, fill in an application form, and wait… After an hour of this mumbo jumbo, I received the money on my PrivatBank card in hryvnia.
I had to create a wallet once again in February 2021, when I began working with CoinsPaid Media. There are still no problems with the withdrawal of funds. I work under a civil law contract as an individual. Despite difficult times in my country, CoinsPaid supports me morally and financially, so I’m going to legalize my activities as much as possible. I plan to register as a sole proprietor. Thankfully, legislation now allows for crypto payments to be accepted, with certain caveats and conventions, but still, it’s something.”
The point is that the first version of the bill envisaged the creation of an independent regulatory body for digital assets in the country. According to Zelensky, international experience in regulating virtual assets considers them as financial tools, so the control over the cryptocurrency market should be handled by financial regulators, not a separate body. Zelensky also stressed the impossibility for the state budget to finance the creation of an additional regulatory body for virtual assets.
As requested by the President, the amendments were made, and Volodymyr Zelensky officially approved the law in February 2022.
So, Law No. 3637 stipulates that:
- Cryptocurrencies backed by fiat and stablecoins fall under the control of the National Bank of Ukraine (NBU).
- Virtual assets without collateral or that are secured by other cryptocurrencies will be controlled by the Ministry of Digital Transformation.
- Digital assets backed by derivatives and securities will fall under the control of the National Commission on Securities and Stock Market (NCSSM). The regulator will also supervise crypto service providers in the country and issue permits for their operation.
First of all, the Law clearly states that cryptocurrencies in the country are considered an “intangible asset,” meaning that their possession by citizens isn’t prohibited. Nonetheless, service providers are obliged to undergo registration. The Law provides a one-year permit for foreign and local crypto exchanges if minimum requirements are met. The main condition is a registered capital of $42,000 for Ukrainian firms and $210,000 for foreign ones. Under the new legislation, the fine for providing services without permission will be from 34,000 to 119,000 UAH (about $1,000 to $3,500).Nataly Antonenko, a regular author of CoinsPaid Media, told about the prevailing sentiments in the local cryptocurrency community after the bill was passed:
“Most of the crypto enthusiasts I know, just like me, were excited about the changes when they heard about the bill. For example, the minimum requirements for official registration of crypto exchanges in the country would allow Binance to issue its crypto cards to Ukrainians. As for me, this would be a great alternative to bank cards.”
The bill could indeed open up access for Ukrainians to pay for their daily needs with cryptocurrencies without having to convert them into hryvnia. This would lay the groundwork for further acceptance of cryptocurrencies as a means of payment. In fact, Binance has allowed Ukrainians to receive crypto cards, but only for refugees living in the EU.
“The hryvnia’s unstable exchange rate forces many Ukrainians to keep their savings in other currencies. I believe cryptocurrency is a great alternative, given the ability to multiply your assets while storing them; for example, by staking them. Moreover, the passage of appropriate legislation will let big players enter the country and create new jobs for Ukrainian specialists, who are now forced to work outside the state or hide their income by working remotely.
Speaking from my personal experience, working at CoinsPaid Media was a kind of salvation amidst the whole nightmare happening in Ukraine right now. Fortunately, our team has no political talk, so the work gives me both a distraction and an opportunity to earn money. Stablecoins, in this regard, are the ideal means of payment for me, and there is no problem in Ukraine today with receiving them on your card. Besides, Ukraine has finally made the first step toward the legalization of such income, so the situation with official crypto wages may soon change for the better,” sums up Nataly.
Sadly, the military conflict on the territory of Ukraine has delayed the development of by-laws, so the procedure for registration and keeping a register of legal entities related to the turnover of virtual assets in the country hasn’t been developed. For this reason, Binance never officially entered the market and doesn’t issue crypto cards.
As of September 7, 2022, in Ukraine, only basic Law No. 3637, which establishes the basic rules of crypto activity, is in force. There is still no proper regulatory framework in the country. The necessary changes in the Civil and Tax Codes haven’t been made either.
According to Alex Bornyakov, Deputy Minister of Digital Transformation on IT Development, the main change in the Ukrainian Tax Code regarding digital assets will be the abolition of VAT on all crypto transactions. Also, the Ministry of Digital Transformation doesn’t consider crypto mining illegal, as long as the payment for electricity is made conscientiously.
Some developments are being actively discussed in various committees. One proposal involves charging individuals owning crypto-assets a 5% personal income tax and a 1.5% war tax. But taxes will be imposed only on the income received, that is, the difference between the income from crypto transactions and the documented costs.
Legal entities will be exempt from paying personal income tax but must declare income and pay a 5% income tax on all transactions with cryptocurrency and exchange rate differences.
“The military conflict in the country has practically paralyzed the economy and also made currency transfers in Ukraine both expensive and often simply impossible,” Dmitry Popov, an outsourced author at CoinsPaid Media, shared his observations. “I got acquainted with cryptocurrencies in 2017 when things went viral. I started actively studying the topic and now write exclusively about the industry. My salary today is exclusively in crypto. In modern Ukrainian realities, it’s easy to appreciate the weighty advantage of using cryptocurrencies. It’s fast and convenient — you send a transfer, and the recipient’s already received it within a couple of minutes. Unfortunately, I can’t pay for goods and services in crypto, but I can withdraw it directly to my card.”
Yuriy Kushnerov, Google Ads Specialist at CoinsPaid Media, who also lives in Ukraine, shared his relations with the cryptocurrency market:
“As an individual, I’ve been closely following crypto for a long time. I traded a little bit, especially in 2020, when COVID-19 was raging around the world. At that time, I had little work and plenty of free time. I had experience with currency exchanges, so I dabbled in leveraged futures. I traded on the exchange, and the volatility was good, but I suffered losses in 90% of cases.
I bought some coins for $200-300 at different times for the long term; luckily, I had enough money. Some assets closed completely, and some have changed format; for instance, Stronghold, where my 300,000 coins burned. There were a couple of projects where I used inner exchange coins, like BNB on Binance, but the developers blocked the project, like Digex, for example. All in all, I got completely disillusioned.
I didn’t work with crypto as a legal entity. I accepted payments once or twice and only recently. There was no legal way to accept crypto, and when I got paid, I had to transfer the money to my account. That is, the client paid me in crypto, I withdrew it to my card and then transferred it to my official account because the income must be recorded. I pay taxes and my accountant’s salary from it.”
To close the topic of interaction with the cryptocurrency market among CoinsPaid Media’s remote employees, we took a comment on this topic from another one of our authors, Evgeny Zatsepin:
“For me, as a crypto enthusiast, CoinsPaid Media, first of all, produces informative and relevant content about the cryptocurrency industry. Thanks to CoinsPaid Media, I can keep on top of the latest news from the world of cryptocurrencies, study forecasts and articles by experts on emerging trends, and much more. I’m grateful to the team for the opportunity to cooperate as an article author and for stable payment for my work. There have never been any problems with it. You can trust the professionals working here, and politics and personal views have never interfered in the work process.”
In conclusion, we hope that we were able to answer all of the reader’s questions about the current situation in the cryptocurrency market in Ukraine. Besides, flattering comments from our employees encourage us to support them even more in such difficult times. By the way, CoinsPaid stated its position regarding Ukraine at the very beginning of the conflict, supporting the country and its citizens.