Ukrainians have embraced Bitcoin and other cryptocurrencies in large numbers. They may soon receive official approval.
The Ukrainian Parliament decided today to legalize bitcoin and to allow cryptocurrency exchanges to operate legally in the country. Until now, cryptocurrency, including Bitcoin, has existed in a legal gray area in Ukraine, Europe’s seventh-largest country. Nonetheless, Chainalysis, a blockchain data organization, placed Ukrainians as the world’s top cryptocurrency adopters in September 2020.
If the bill becomes law, banks will be permitted to accept cryptocurrency company accounts, while citizens who hold them will have legal protection in the event of theft.
The Ministry of Digital Transformation, established in 2019 to promote digital literacy and online access, prepared the legislation and will be responsible for enacting it. The bill is anticipated to take effect this fall, following amendments to the tax code and presidential signature.
Ukraine’s nominal GDP is not proportional to its population, placing it 23rd out of 46 nations in a 2019 International Monetary Fund assessment. The Ministry wishes to increase that figure by luring cryptocurrency businesses.
“In particular, the adoption of specialized legislation is going to stimulate the attraction of foreign exchanges to the Ukrainian market,” said Deputy Minister Oleksander Bornyakov in a press release shared with Decrypt. “It will become a powerful incentive for the further development of the crypto-sphere in Ukraine.”
This is especially true in Eastern Europe, where cryptocurrency usage is significant, if not always legal or regulated. Chainalysis said in its analysis that Ukraine has a high level of corruption and asset seizure, as well as declining trust in banks. Citizens have embraced cryptocurrencies as a means of asset protection, sending $8.2 billion in cryptocurrency last year. Regulated exchanges and cryptocurrency firms could increase that figure.
For months, the Ministry of Digital Transformation has been engaged in the crypto space. It signed an agreement with the Stellar Development Foundation in January to build a central bank digital currency — a virtual equivalent of the hryvnia — a project that the National Bank of Ukraine began four years ago. Stellar would assist in building rules and cryptocurrency infrastructure as part of the arrangement, which the Ministry presented as a method to increase the country’s competitiveness in the Eastern European market.
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