Ukraine: Laws Related to Token Sales, Blockchain, and Digital Proof

On October 6, 2017, the bill (draft law) #7183 “On cryptocurrency turnover in Ukraine” was registered on the website of the Verkhovna Rada (Ukraine’s Parliament), however, it received many negative feedbacks from industry experts.

On October 10, 2017, another (alternative) bill #7183-1 was added. (By August 2018, no updates/amendments were implemented)

The purpose of this draft law is to establish the legal and organizational basis for the implementation of the crypto industry in Ukraine, to stimulate the development of payment and digital infrastructure, ensuring mining and turnover of cryptocurrency, to ensure the rights and legitimate interests of persons engaged in commercial and economic activities in this industry and investors.

In Article 1 of the draft law, the cryptocurrency is designated as a “decentralized digital measurement of value”, which for the purposes of legal regulation is considered a “ financial asset”».

In Article 6 of the bill, according to the Law of Ukraine “On financial services and state regulation of financial services markets”, the regulator of the cryptocurrency turnover market, is defined as the state body that regulates and supervises the activities in the markets of non-Bank financial services (except for activities in the securities market). Therefore, we can assume that it could be either The National Committee on Financial Services or The NBU in the case of the transition to it the appropriate authority after a possible reform in the financial services market. At the moment there are three regulators in the financial market – the NBU, the National Committee on Financial Services, and The National Securities and Stock Market Commission).

The bill prohibits any exchange operations with cryptocurrency outside licensed exchanges. An exchange is a legal entity that has the status of a financial institution and provides all types of financial services in the cryptocurrency market. The minimum amount of authorized capital should be not less than five million hryvnias on the day of the issuing a license. The authorized capital must be formed exclusively in cash. At least 51% of the authorized capital must be owned by a citizen of Ukraine.

Crypto exchange operations for the purchase of cryptocurrency for the national currency can be carried out exclusively by investors in the cryptocurrency market.

For individuals and legal entities, residents and non-residents are forbidden to open anonymous accounts. The terms of opening an account, including personal information and KYC policy, must be included in User agreement of an exchange. However, details of required information are not specified.

The miner can be only a business entity (sole proprietor or legal entity). In addition, the Bill 7183-1 provides some special policies for miners. For example, preferential taxation and special tariffs for electricity.

The analyzed version of the bill does not contain any mention of ICO or token at all. There are definitions of derivatives for cryptocurrency, but this bill does not give anything specific and clear about the status of tokens.

In contrast to the draft law № 7183, the alternative bill provides for the introduction of a 2% fee for mandatory state pension insurance with each crypto-exchange operation, which would lead to additional revenues to the Pension Fund of Ukraine and reduce the financing of its deficit from the State budget of Ukraine.


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