The government in Kiev intends to legalize cryptocurrencies and comprehensively regulate the fintech sector as part of a new public policy developed by the economy ministry. The process may take up to three years to complete but eventually the industry built around digital assets should become a legitimate part of the country’s economy.
Parliament to Adopt Laws for ICOs and Smart Contracts
The new regulatory concept will be implemented in two stages. The legal status of cryptocurrencies, trading platforms and other entities dealing with digital assets must be determined in 2018 and 2019. By the end of next year, the Ukrainian government will analyze the market to identify trends and outstanding issues in order to put forward adequate proposals to regulate the whole sector.
According to the document prepared by the Ministry of Economic Development and Trade, the next stage, 2020-2021, would involve recognizing cryptocurrency wallet providers and custodial platforms as “subjects of primary financial monitoring.” The status is typically granted to traditional financial institutions such as commercial banks and insurance companies.
During that time, Ukrainian lawmakers are expected to draft and adopt legislation regulating initial coin offerings (ICOs), tokens and the use of smart contracts, Forklog reported. A number of bills have been filed in the Verkhovna Rada, Ukraine’s parliament, since last year but very little progress has been made toward their adoption.
The first three drafts from last fall were meant to regulate the circulation of digital coins, stimulate the cryptocurrency market and amend the Ukrainian tax code to regulate the taxation of profits related to digital assets. In the last couple of months, two bills introducing tax breaks for businesses and individuals dealing with cryptocurrencies have been proposed by Ukrainian legislators from different political parties.
Companies to Gain Access to Banking Services
In an announcement published on its website this week, the economy ministry expressed confidence that the implementation of its regulatory concept would allow crypto companies to gain access to banking services and attract more capital through regulated token sales. The ministry noted that due to the legal uncertainty, these businesses face many difficulties, while the industry remains largely part of the shadow economy.
The authors of the new strategy hope that the regulation of the sector will increase budget receipts and foreign investments, while stimulating the development of the digital economy. In less than two years, Ukrainian companies have raised over $100 million through ICOs and cryptocurrency mining businesses are generating $100 million annually. The daily volume of trading cryptocurrencies with the Ukrainian hryvnia has reached almost $2 million and the Ministry of Economic Development claims Ukraine is among the top 10 countries by number of cryptocurrency users.
The ministry’s initiative is the second attempt this year to coordinate the efforts of Ukrainian institutions aimed at adopting a comprehensive legal framework for the cryptocurrency space. In July, Ukraine’s Financial Stability Council approved another regulatory concept for the sector, and in January, the National Security Council formed a working group tasked to finalize the different proposals. The new document will be submitted for approval by the Cabinet of Ministers.