Legalizing the shadow: why the new crypto law is not about the market but about control
4 September 18:36
The crypto market in Ukraine is here to stay! This is the decision of the Ukrainian parliament, having supported the draft law on virtual assets in the first reading. If the document passes the second reading, the lucky owner of electronic money – whatever it is called – will have to declare it and pay tax to the state budget. But so far, there are more questions about the crypto market than answers.
The author of the draft law, MP Danylo Hetmantsev, assures that the legalization of cryptocurrencies can bring up to UAH 15 billion to the budget annually. What does Mr. Hetmantsev propose? First of all, he notes that virtual assets (VA) are not money and cannot be used as an official means of payment in Ukraine. Their legal regime is close to that of movable property in terms of civil law.
Services related to the circulation of such assets are subject to authorization and regulation. The draft law also provides for investor protection, transparency, anti-manipulation, and defines the tax regime, a key point that was not implemented in the previous law.
Most importantly, it is proposed to introduce a separate taxation of income from transactions with the VA. The tax will be levied only on profits (income minus expenses), and individuals will declare their income independently.
“It’s simple,” assures Getmantsev, “you file an annual declaration, where you show the difference between the income from the sale and the purchase costs. You pay tax on this difference.”
The following are exempt from taxation: the exchange of VAs for VAs, income within one minimum wage, and assets received for free, such as donated ones. It is possible to take into account losses. A 5% preferential rate applies to the sale of UA purchased before 2026. A general taxation of 18% is envisaged, with 5% of profits.
For legal entities, tax adjustments are introduced for transactions with the VA and the determination of expenses by the Ministry of Finance. Transactions with VA (except for NFTs and assets that confirm the right to claim property or services) and services for their circulation are not subject to VAT. At the same time, it is forbidden to use the simplified taxation system for transactions with VA.
“This is a matter of establishing clear rules of the game for market participants. Legalization of crypto can potentially have a significant effect on the budget – according to a study by Global Ledger, if the crypto market had been legalized earlier, the state could have received about UAH 8.34 billion in taxes from crypto exchanges registered in Ukraine (at a rate of 18%) and up to UAH 6.53 billion from taxation of citizens’ incomes in 2021-2024 alone,” Hetmantsev said.
All changes are scheduled to be implemented on January 1, 2026.
The essence of the draft law is to whitewash corrupt and criminal assets
Attempts to force cryptocurrency owners to come out of the shadows may have the opposite effect, says financial analyst Vasyl Borovsky, as the market will go even further into the shadows. Although this will open up the possibility for a certain group of people – politicians, officials, law enforcement officers, and criminals – to legalize their crypto assets at a reduced rate.
“The essence of the bill is to whitewash/launder corrupt and criminal funds through crypto. It’s no secret that recently bribes have been taken in cryptocurrency, which makes such transactions difficult to track and even more difficult to prove that it is a bribe. If you look at the declarations of law enforcement officials and officials, there is a lot of money in crypto, and there are crypto millionaires among the MPs. Even the 5% tax exemption was invented exclusively for them so that they could save money and not report on the origin of the crypto,” Borovskyi said.
In addition, as financiers emphasize, there will still be a loophole for tax avoidance. Gifts up to a certain amount are not taxed, so the profit can be easily transferred to another wallet and declared a gift. And since digital currency is not a means of payment, income from virtual assets is not considered as such until it is received in fiat form.
A stillborn bill
Legalization of crypto will bring much less to the budget than was spent on the creation of this bill. It is for the naïve who will believe it, and then, as in the case of the onlifans, they will be arrested, robbed and forced to work for an uncle, taking most of their earnings,” said cyber expert Konstantin Korsun on his Facebook page.
According to the expert, crypto exchanges and crypto exchanges are still in a gray area, and the crypto market needs protection from the arbitrariness of law enforcement.
“In a democratic state, everything that is not prohibited is supposed to be allowed. But this is only in theory. And our state is not exactly democratic. And comrade majors can very easily “paint” an unyielding crypto businessman with “terrorist financing” or “cooperation with the aggressor state”. It is enough to record one transaction on a crypto wallet. And if you have thousands of transactions a day, how can you check them all? And then the cavalry will come, the assets will be seized, some of them will “disappear” during the search, and the rest will be bargained for,” Korsun said.
For the authorities themselves, this draft law is a huge scheme to legalize the black corruption cache.
“They will pay their 5% personal income tax and get millions clean and laundered. And some transactions are not taxed, such as the exchange of one cryptocurrency for another. And “losses incurred in previous periods can be taken into account before they are repaid” is a common cliché for schemes. I didn’t even delve further into the text because I don’t see the point,” the expert emphasizes.
According to Hetmantsev’s draft law, all transactions with virtual assets are subject to annual reporting to regulatory authorities – formally to combat money laundering. However, in practice, such measures are unlikely to stop criminals – they will continue to do what they have been doing before, Korsun believes.
He concludes that this bill is stillborn. A very narrow group of people with very specific, material interests are interested in it. The conditions declared by the draft law are unacceptable for the majority of conditionally honest crypto businesses, so this market will continue to remain “wild”.
Author: Alla Dunina
