In an official statement, the Ukranian government confirmed its plans to establish regulatory frameworks to legalize crypto in the region.
As a part of an initiative to consider and acknowledge cryptocurrency as an emerging technology, the Economic Development and Trade Ministry in Ukraine released a new state policy to oversee various cryptocurrency-related sectors which will be put in full effect by the end of 2021.
Throughout 2018 and 2019, the government of Ukraine will integrate regulatory frameworks to strictly govern the local cryptocurrency exchange market. Crypto trading platforms will be required to implement Know Your Customer (KYC) and Anti-Money Laundering (AML) systems to help local authorities monitor the market.
By 2020, the government plans to delve into the cryptocurrency mining industry, smart contract protocols, and taxation, as the second part of the initiative to recognize cryptocurrencies as an asset class and an established industry.
Researcher Denis Zarytsky stated that the official document released by the government of Ukraine outlined a 5 percent tax payable by entities and individuals with cryptocurrency holdings, a rate that is substantially lower than other regions like France and the UK that have over 10 percent tax on cryptocurrency investments.
Regions that have recognized cryptocurrencies as properties impose higher taxes, as Japan and Australia have done in the past. In early 2018, both Japan and Australia removed double taxation on crypto.
“They aim to determine guidelines for token classification. Additionally, they will be touching upon issues that relate to smart contracts and cryptocurrency mining. Therefore, this work will be ongoing. There will be two separate stages to the implementation of this new state policy. The hope is to have this policy in full effect by 2021. In addition to the new state policy, the government notably has brought in a new taxation bill. This outlines a new 5% tax that is payable by entities and individuals with cryptocurrency holdings.”
In October, Yuriy Derevyanko, a member of the anti-corruption Movement of New Forces and a legislator of Ukraine, called for the complete elimination of taxes on crypto by the end of 2020.
Derevyanko firmly stated that crypto has the potential to become one of the major markets of Ukraine and a driving force of the country’s economy.
“I believe we need to impose a moratorium on taxation of [the crypto]area for the next 10 years. We have to regulate and legalize this segment, which will become an engine for a new economy.”
Currently, both the opposing and the ruling party of Ukraine remain positive on the long-term growth of the cryptocurrency sector and blockchain technology.
The positive sentiment towards the new asset class in the country could lead to a sped-up process of implementing the policy drafted by the government to legalize cryptocurrencies within the next three years.
Falling Back Behind Japan and South Korea
Singapore, South Korea, Japan, Switzerland, the UK, and France as of late have shown significant progress in terms of regulation and infrastructure establishment to facilitate increasing demand towards the asset class.
While local experts remain optimistic regarding the three-year plan of Ukraine, some have expressed concerns in the timeframe of the initiative and that the period of three years could allow other emerging cryptocurrency markets to take first-mover advantage.
Images from Shutterstock