Ukraine legalizes its crypto sector as donation pours in

• The bill “On Virtual Assets,” establishes a legal framework for Ukraine to operate a regulated crypto market.
• The crypto market will be regulated by Ukraine’s National Commission on Securities and the Stock Market.
• To date, Ukraine has received US$100 million in crypto donations since its war with Russia started.

In 2021, Ukraine went through a lengthy process to legalize cryptocurrencies and after some detours and debates, the bill were finally passed in February this year. However, it was only yesterday that President Volodymyr Zelinsky Officially signed that bill into law, establishing a legal framework for the country to operate a regulated crypto market.

The bill, known as “On Virtual Assets,” were made into law at a time when digital asset donations are pouring into Ukraine to support the country’s defense against a Russian invasion. To recall, in October 2021, Zelinsky didn’t sign the country’s first bill regulating digital assets into law because he wants the National Commission on Securities and Stock Market to become the main crypto regulator. 

So changes were made and when the bill was presented and voted for last month, it was stipulated that the market will be regulated by Ukraine’s National Commission on Securities and the Stock Market. To top it off, exchanges will be able to operate legally, and banks will open accounts for them, the digital ministry said in a tweet.

Ukraine has legalized the crypto sector — @ZelenskyyUa signed a law. From now on foreign and Ukrainian cryptocurrencies exchanges will operate legally and banks will open accounts for crypto companies. It is an important step towards the development of the VA market in Ukraine. pic.twitter.com/lqqO1J9r1k

— Міністерство цифрової трансформації України (@mintsyfra) March 16, 2022

In short, the law empowers the country’s National Securities and Stock Market Commission with the ability to determine the country’s policies on digital assets, issue licenses to businesses dealing with crypto, and act as a financial watchdog, according to a February 17 government announcement.

The Ministry of Digital Transformation in a statement also said that the law determines the legal status, classification, ownership and regulators of virtual assets, as well as setting registration requirements for crypto services providers. Even though Ukraine hasn’t formally regulated digital currencies prior to this, it has still proven itself as a leading crypto hub. 

The country ranks fourth on the Global Crypto Adoption Index by Chainalysis. Legalizing the currency will ensure exchanges are better protected, Fedorov said. “Ukrainians could protect their assets from possible abuse or fraud,” Minister for Digital Transformation Mykhailo Fedorov said in the February statement.

Till date, Ukraine has received at least US$100 million in crypto donations over the past three weeks amidst Russia’s invasion. According to reports, the majority of donations received to date have been in Bitcoin and Ether, although US dollar stablecoins contribute a significant proportion. But it’s not only crypto assets that are being donated; people are also sending NFTs to the Ukrainian government’s Ethereum account.

Interestingly, according to the New York Times, the Eastern European country processes more transactions per day in cryptocurrency than in its fiat currency, the hryvnia. Although Ukraine has not followed the path of El Salvador, which adopted Bitcoin as a legal tender, the new law will provide reassurance to businesses operating in what was previously a legal gray area. “Market participants will receive legal protection and the opportunity to make decisions based on open consultations with government agencies,” Fedorov said.