Ukraine Approves First Draft to Legalize and Tax Bitcoin

The approval of this draft bill not only marks a pivotal policy shift but also aims to provide regulatory clarity, potentially boosting Ukraine’s crypto market while increasing state revenue.

In a sweeping move, Ukraine’s parliament has moved forward with the first draft of a bill to regulate Bitcoin and other cryptocurrencies. This legislation seeks to establish a clear legal and tax framework for digital assets. The bill garners substantial parliamentary support, with 246 out of 321 deputies voting in favor. This action reflects a growing governmental interest in regulating and benefiting from the burgeoning crypto sector.

The primary drafters of the bill include MP Yaroslav Zhelezniak from the Holos faction and Danylo Hetmantsev, head of the Committee on Finance, Tax and Customs Policy. Both have been instrumental in outlining the legislative details and virtual asset definitions for Ukraine’s crypto markets. Though the draft has passed its initial phase, amendments are anticipated before the final enactment.

“246 deputies voted for the adoption of the document.” — Yaroslav Zhelezniak, MP, Parliament of Ukraine

The implications for Ukraine’s financial system are profound, aiming to transform its informal crypto economy into a regulated one. The draft proposes an 18% tax on profits from crypto transactions, along with an additional 5% military tax, establishing a total tax rate of 23%. However, it offers a preferential 5% tax on conversion from crypto to fiat in the first year, promoting compliance and capital repatriation.

As part of the broader international crypto trend, newly regulated frameworks have led to increased transparency and higher tax revenues, as seen in regions like Kazakhstan and Estonia. Ukraine’s step might also inspire more institutional trading and could reduce unauthorized peer-to-peer activities.

The crypto community in Ukraine remains observant of potential regulations on DeFi protocols and altcoins. While there is a sense of regulatory uncertainty, there is also optimism that these changes could legitimize the market, attracting new investments. The bill, although still in draft, could serve as a precursor to more robust regulatory practices, embedding advanced standards in cryptocurrency governance.