Zelensky sends cryptocurrency law back to parliament

President Volodymyr Zelensky on Oct. 5 vetoed a bill legalizing cryptocurrency in Ukraine and sent it back to parliament for changes.

The bill that passed the Verkhovna Rada in September says that the virtual assets market would be regulated by the Ministry of Digital Transformation, the National Bank of Ukraine (NBU), the National Securities Commission (NSC) and a new independent regulatory body that would have to be created.

However, Zelensky wants to get rid of the new regulator requirement, saying there’s no money for it in the budget.

Now Ukraine’s parliament needs to accept the president’s proposal and vote for the law again, or to defend the creation of an independent regulator.

If Zelensky’s amendments are adopted, Ukraine’s market of virtual assets will be regulated by the National Securities Commission, the National Bank and the Ministry of Digital Transformation.

However, the NSC is against the participation of the ministry. According to the NSC’s member, Irakliy Baramiya, Ukraine’s Ministry of Digital Transformation “has no expertise in cryptocurrency regulation.”

Overall, Zelensky’s amendments do not change the “legal part of the law,” according to Daria Skoblikova, a lawyer at the law firm Investment Service Ukraine. That is, the law still allows crypto businesses to work officially in Ukraine and pay taxes here.

However, it is too early to say what the amendments mean for the industry because the parliament hasn’t yet reviewed them, said Michael Chobanian, the founder of Kuna, an exchange for crypto assets.

On the one hand, Zelensky’s proposals mean that Ukraine could save money and that the NBU and the NSC could govern the virtual assets market in the traditional way, according to Olena Bilous, an associate at LCF Law Group.

But on the other hand, the attempt to impose the current financial regulation on the virtual assets market “is a rather non-progressive policy that can significantly slow down the Ukrainian financial system,” Bilous said.

The regulation of cryptocurrency is on the NBU’s top list of priorities for 2022.

For the central bank, virtual assets “open up many promising opportunities,” but they are also a source of potential risk, including money laundering, financing of illegal goods and using virtual assets instead of a traditional bank.

The regulation of the cryptocurrency market in different countries depends on the definition, or the legal status of virtual assets, Skoblikova said.

In the U.S., for example, the Securities and Exchange Commission, which regulates securities, also regulates virtual assets.

Ukraine defines virtual assets as intangible assets expressed as electronic data. As of right now, they cannot be legally used as currency; only the hryvnia can.