The introduction of regulation of the virtual assets market in Ukraine is an extremely urgent issue, given their wide perception among the population. At the time of writing, Ukraine does not have special legislation on virtual assets in force, but the Law of Ukraine on Virtual Assets (Law on Virtual Assets) has already been adopted, which will enter into force on the date of entry into force of the Law of Ukraine on Amendments to the Tax Code of Ukraine on the Features of Taxation of Transactions with virtual assets No. 7150 dated 13.03.2022, which has not yet been reviewed and adopted by the Verkhovna Rada of Ukraine.
According to the VA Act, virtual assets can be secured or unsecured. Depending on its characteristics, virtual currency can fall under either one or another type of virtual asset. However, this Law also states that virtual assets are not a means of payment on the territory of Ukraine and cannot be exchanged for property (goods), work (services). Therefore, the hryvnia remains the only legal means of payment on the territory of Ukraine. Not so long ago, there was a transfer of real estate from one owner to another in Ukraine in exchange for Ethereum cryptocurrency, however, since the entry into force of the VA Law, such transactions will become impossible, and virtual currencies in Ukraine will play a significant role only in venture investing of both ordinary individuals and , it is reasonable to assume, legal entities.
Who will be the regulator of the VA market? Until the entry into force of the VA Law, virtual assets in general, and cryptocurrencies in particular, are not subject to any regulatory regime, including, they cannot be considered securities. Cryptocurrency does not have the characteristics of a document and an issuer, namely: it does not have an established form of a document with the relevant details certifying a monetary or other property right, it does not have a definition of the relationship between the issuer of the security (the person who issued the security) and the person who has the right to security, and does not provide for the fulfillment of obligations under such security, as well as the possibility of transferring rights to the security and rights to the security to other persons.
With the adoption of the VA Law, which establishes the basic rules of the market, the regulation of virtual assets begins to take on clearer contours. The law divides VA into unsecured (these include cryptocurrencies) and secured. The second group includes financial securities issued by residents of Ukraine, secured by currency values, and financial securities secured by securities or derivative financial instruments. The provision of a virtual asset means the certification of property rights, in particular the rights of claim to other objects of civil rights. The security of virtual assets is not security for the performance of an obligation. A certificate of property rights means confirmation of the right of the owner of the secured virtual asset to claim the security object.
The object of securing a virtual asset is another object of civil rights, the right of claim to which such a virtual asset certifies. The object of securing a virtual asset is determined by the deed according to which such a virtual asset was created. Property rights, in particular claim rights, to the virtual asset security object are transferred to the acquirer of such virtual asset. The Law on VA determines that state regulation in the field of virtual assets is carried out by the National Bank of Ukraine (NBU) and the National Commission for Securities and the Stock Market (NCSCFR). Their powers are divided according to the type of virtual assets, and if the NBU determines the order of circulation on the territory of Ukraine of those assets that are secured by currency values, then the NKCPFR is the main regulator that determines the order of circulation of all other types of assets, issues licenses/permits, is a subject of the state financial monitoring for service providers related to the circulation of virtual assets, etc.
However, due to the fact that the Law on VA has not yet entered into force, at the time of writing, the NKCPFR has not yet defined the scope of duties and tasks and this work will be carried out in the future. At the same time, it is already clear that in order to obtain a permit to carry out VA activities, service providers will be required to form authorized capital, implement KYC/AML policies and fulfill other requirements of the regulator, and the validity period of the permit will be equal to one year.
Bank and money transfers. As already mentioned, virtual assets will not be recognized as a means of payment, and therefore the possibility of purchasing goods/services for VA will not be available. Under such circumstances, the transfer of a virtual asset from one person's virtual asset wallet to a third party's virtual asset wallet will be considered a VA transfer. At the same time, the transfer of assets secured by foreign currency values (hereinafter - ЗВА(VC)), in accordance with the Law on Currency and Currency Transactions, can be considered a currency transaction, since "a currency transaction is a transaction that has at least one of the following characteristics :
an operation related to the transfer of ownership of currency values and/or
claim rights and related obligations, the subject of which are currency values, between residents, non-residents, as well as residents and non-residents, except for operations carried out between residents, if such currency values are the national currency;...".
Thus, the transfer of BA is subject to the norms of the Law of Ukraine on currency in the parts regulating the implementation of currency transactions. In particular, banks and non-banking financial institutions (NBFIs) can carry out operations only if they have a banking license or a license from the NBU to carry out currency operations, respectively. In its license for the NBFU, the National Bank specifies which currency transactions are allowed to be carried out.
Regulation of miners. Miners are not covered by the VA Law, however, their activity is not prohibited by any regulatory act, and therefore mining activities are not regulated.
The text of this publication was prepared and published by the State Financial Monitoring Service of Ukraine, with the assistance of the OSCE Project Coordinator in Ukraine ("Overview of legislation on the regulation of virtual assets").
