Bill Proposed In Ukraine To Regulate Cryptocurrencies

On October 6, 2017, the Verkhovna Rada (Parliament) of Ukraine received a proposed legislation that, if passed, would provide regulatory guidelines for cryptocurrencies. The legislation authorizes the National Bank of Ukraine, the country’s central bank, to regulate cryptocurrencies.

Konstantin Yarmolenko, advisor to the head of Ukraine’s State Agency for E-Governance, thinks lawmakers missed the mark with the bill. He issued the following statement:

“The lawmakers have made one dramatic mistake. They made the National Bank responsible for regulation of cryptocurrencies, even though the regulator itself has stated on numerous occasions that cryptocurrency is not a currency, and therefore, is not a part of its jurisdiction.”

Nonetheless, article eight of the draft legislation, as translated, reads: "The procedure for the creation and operation of cryptocurrency exchange shall be carried out solely in accordance with the procedure established by the National Bank of Ukraine."

Other sections of the bill refer to the taxation of cryptocurrencies, which is already governed by existing laws. Translated passages from article six and article eight state:

Article 6, Section 3:

"The procedure for taxation of operations for the taxation, exchange (exchange) of cryptographic goods is regulated by the current legislation of Ukraine."

Article 8, Section 4:

"The income received by the cryptocurrency exchange from the implementation of crypto-transactions is subject to taxation in accordance with the requirements of the current legislation of Ukraine."

While cryptocurrencies are subject to the country’s tax laws, the bill disclaims any guarantees and consumer protections by the Ukrainian government. Article 4 provides:

"Section 1: The state is not liable, nor does it reimburse the value of crippling goods in case of its depreciation or loss for any other reasons. Section 2: The State does not guarantee and does not take any measures to provide online cryptographic exchange services."

The proposed legislation also modifies the current Law of Ukraine “On the National Bank of Ukraine” to add identification procedures relative to cryptocurrency exchange activity.

Notably, in what might be an obscure reference to the former Ukrainian province of Crimea, which was annexed by Russia in 2014, article 6, section 4 of the draft states that cryptocurrencies may not be used as a basis for “calls to overthrow the constitutional order,” or “violation of the territorial integrity of Ukraine.”

According to the legislation, the law would "enter into force" three months after publication. It remains to be seen if revisions will be made.