The Verkhovna Rada of Ukraine approved the law on virtual assets

The Verkhovna Rada of Ukraine approved the Law “On Virtual Assets” (the “Law”). For the first time, the Law allows the circulation of virtual assets (including cryptocurrencies) in Ukraine and their declaration.

The Law was signed by the President on 16 March 2022 and will enter into force following approval of the law on taxation of transactions with virtual assets.

Under the Law, it will be possible for individuals to conduct transactions with virtual assets, particularly with cryptocurrencies legally; the Law also allows activities of intermediaries in the sphere of virtual assets.

The Law defines “virtual assets” as intangible benefits, expressed as a dataset in electronic form, that have a certain value.

The Law mainly regulates the activities of foreign and Ukrainian providers of services for the circulation of virtual assets (for example, crypto-exchanges). It also allows individuals – owners of virtual assets – to open bank accounts for transactions with such assets and provides judicial and extrajudicial protection of rights to such assets. These provisions present a breakthrough in the protection of virtual assets’ owners’ rights and create opportunities for better diversification of assets by their owners.

The Law separately envisages the need to amend the Tax Code of Ukraine, which should establish the possibility of tax reporting virtual assets and tax regime for income of individuals and legal entities from transactions with virtual assets.

Another important innovation of the Law is the possibility for declaring virtual assets by individuals who shall submit electronic declarations under the Law on Prevention of Corruption.

The Law is expected to significantly facilitate compliance procedures and verification of funds’ sources for owners of virtual assets.

The National Securities and Stock Market Commission and the National Bank of Ukraine (for virtual assets backed by currency assets) will become the regulators of the virtual assets market.

The Law also provides for international cooperation in the sphere of virtual assets and the implementation of FATF standards that will be used for financial monitoring of transactions with virtual assets. It should facilitate recognition of documents issued in Ukraine related to virtual assets by foreign regulators, banks and other financial institutions.

We will be glad to provide additional information on legislative updates in the field of virtual assets in Ukraine.