Ukraine's Verkhovna Rada has approved a crypto bill in its first reading, a significant step towards regulating virtual assets and their taxation. The "On Virtual Assets Markets" bill aims to define the legal status of cryptocurrencies. Binance, a major player in the crypto space, has provided feedback on proposed amendments, focusing on user protection and tax clarity.
Key Takeaways
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Binance has proposed amendments to the crypto bill, aiming to simplify user experience.
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The proposed tax regime focuses on capital gains, with a potential 18% profit tax plus a military levy.
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Concerns remain regarding data privacy and the specific regulatory body.
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Legal experts suggest significant revisions are needed for clarity and to avoid hindering business growth.
Binance's Perspective on Amendments
Kirill Khomyakov, Head of Regional Markets at Binance for CIS, Central and Eastern Europe, and Africa, shared insights into the proposed changes. He highlighted that amendments submitted by Binance, other exchanges, and the Ministry of Digital Transformation are intended to "simplify users' lives." Khomyakov anticipates substantial changes to the bill by the second reading.
Tax Regime and Implementation Timeline
Binance's representative believes the fiscal policy is a crucial aspect. The current proposal suggests taxing only profits made when converting crypto to the national currency, with no taxes on transactions or portfolio fluctuations. The expected tax rate on profits converted to hryvnia is 23% (18% profit tax plus a military levy). Binance has proposed a preferential tax regime, awaiting a decision from lawmakers. Khomyakov forecasts the second reading could occur by year-end, with the law potentially taking effect on January 1st after presidential approval. The subsequent 6-12 months will be for regulatory bodies to prepare subordinate acts and procedures. Importantly, Khomyakov noted that until the licensing process is finalized, operations will largely continue as they are, likely for at least the remainder of the year and the first nine months of the next.
Data Privacy and Regulatory Authority
Binance has submitted numerous amendments concerning user data protection. If adopted, these would ensure that crypto platforms maintain their current data handling practices. Law enforcement can currently request information in suspicious cases, but mass client data transfer to agencies is not the norm. Khomyakov emphasized the importance of these amendments for user security and protection, hoping the final law will be more convenient and constructive for all industry stakeholders. The government is still deliberating on which body will oversee crypto market regulation, with the National Bank, the National Securities and Stock Market Commission (NSSMC), or the Ministry of Digital Transformation being considered.
Other Binance Initiatives and Market Considerations
Khomyakov also mentioned discussions about creating a national crypto reserve, though it's not an immediate priority. He noted the National Bank's opposition to the law, clarifying that the concern is not about crypto becoming legal tender but about state bodies acquiring crypto assets. Binance plans to launch dollar and hryvnia cards in Ukraine and is establishing a sponsorship fund for Ukrainian blockchain developers. Regarding P2P operations, their future remains uncertain as the current bill doesn't detail these mechanisms. Binance is also preparing its application for a MiCA license in Europe, which may impact P2P operations.
Expert Concerns
Legal experts, such as Petr Bilyk from Juscutum, have pointed out the need for significant revisions to the bill. Concerns include potential conflicts with the legal regime of Diia.City, the need for a longer transition period for market participants to adapt to new compliance requirements, and the harmonization of Ukrainian regulations with the EU's MiCA framework, particularly regarding who can issue virtual assets. The proposal for a separate user registry was also deemed excessive, given that data is already stored on the blockchain. Furthermore, restrictions on companies registered in offshore jurisdictions could lead to the prohibition of certain tokens and capital flight.
Sources
- A Binance representative commented on amendments to the crypto bill in Ukraine, ForkLog.
- The lawyer pointed out the shortcomings of the crypto legalization project in Ukraine, ForkLog.
- Cryptocurrency legalization in Ukraine passed its first reading, ForkLog.
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