In September 2021, Ukraine put a paperless regime in place, meaning that public authorities will no longer be able to demand paper documents from Ukrainians. To boost this new digital economy, the country is also planning to build a top crypto jurisdiction for cryptocurrency and blockchain companies alike.
Last month, Ukraine took an important step and granted legal status to virtual assets. The bill was passed by the government in September. Ukraine is one of the first countries in the world to take such a rigorous approach towards establishing a quality regulatory framework for the virtual asset market. The creation of state infrastructure is a key issue in the crypto space.
Ukrainians see themselves as a tech-savvy country, ranking top-five in the world for the percentage of cashless payments. The country also has a strong blockchain developer community and Ukrainian crypto startups generated $171.4 million in investments from 2017 to 2019. Ukraine leads crypto adoption around the world.
Most of the turnover in the Ukrainian virtual assets market is concentrated in a grey area, which creates potential risks for both the state businesses and the users.
Many companies in Ukraine are not worried about operating ‘legally’ and contributing to the economy. However, there are a number of interested firms who want to structure and capitalise their business by expanding their activity in the ‘real’ sector and working with the banking system.
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An effective tool against corruption
Digitalisation in Ukraine has proven to be an effective tool against corruption. Computers do not accept bribes and are much harder to manipulate. The legislation governing virtual assets has implemented FATF recommendations on the prevention of money laundering, crime, terrorist financing and proliferation. Strengthening this legislation further is the next step towards building a top quality jurisdiction.
The regulation in Ukraine is technology-neutral and is focused solely on regulating economic relations. The service does not regulate cryptocurrencies and tokens as a technology instead, the regulation deals with virtual assets services providers (VASPs).
The biggest question at the moment is regarding who should be the main regulator of the new domain. On October 5, The President of Ukraine, Volodymyr Zelensky, proposed changing the regulators of the market. The new regulators could either be the Ministry of Digital Transformation or the National Commission on Securities and Stock Market.