Ukraine is now team-crypto!
The Ukrainian Parliament, the Verkhovna Rada led by President Volodymyr Zelenskyy, adopted the law to legalize and regulate cryptocurrency on September 8, 2021. The bill was first drafted back in June 2020 and was passed in a nearly unanimous vote the day after El Salvador adopted Bitcoin as a legal tender.
What does the bill say?
Unlike the El Salvador’s move, cryptocurrency will not be accepted as an official payment method in Ukraine, meaning that the national currency remains to be the hryvnia. Instead, according to Euronews, the bill aims to “protect the owners of virtual assets and exchange platforms from fraud” by regulating crypto activities and clarifying the rights and obligations of different stakeholders in the crypto market. It will also permit crypto companies to register in the country and offer legal protection from the state, as long as they fulfil their tax responsibility.
In a news article by Fortune, Ukraine’s vice prime minister of digital transformation Mykhailo Fedorov comments that, “The development of a new industry will allow transparent investments and will strengthen the image of our country as a high-tech state.” Moreover, the deputy minister Oleksandr Bornyakov further adds that, “The adoption of specialized legislation is going to stimulate the attraction of foreign exchanges to the Ukrainian market.” Besides, Ukraine is also looking to establish a cryptocurrency market for business and investors by 2022.
What does it mean for Ukraine?
While it looks like the Ukrainian government is taking this crypto-friendly step to attract investors, experts like the CEO of Binaryx, a virtual asset exchange platform, Oleg Kurchenko warned that the new rules might drive crypto investors away if they find the state untrustworthy. As of writing this article, the public reaction toward the adoption remains unclear.
Before the adoption, the usage of cryptocurrency remained in a gray area as it was neither legal nor prohibited. Ukrainians could purchase and trade crypto, but the local courts could not protect them from potential frauds. That said, the usage of crypto by companies and exchanges have been closely monitored by the law authority in Ukraine. In fact, the Ukrainian law enforcement agencies had regarded cryptocurrencies as a “scam” and raided crypto businesses with no justification.
Recent months have seen governments across the globe attempting to legalize cryptocurrency, in particular in Latin America, such as Cuba, Paraguay and Panama. Venezuela even took a step further to establish its own cryptocurrency—the Petro—despite being dubbed as a “failure” for the lack of competitiveness and public support. In August, the European Union proposed new rules to ban anonymous crypto exchanges by forcibly collecting identifying information of those transacting crypto. However, Euronews also reported that many Europeans expressed their wish for their own government, instead of the European Union, to regulate cryptocurrency.
Volatility of cryptocurrency
Although the media seems to connect the adoption of Bitcoin in El Salvador to the abrupt price drop of Bitcoin on Tuesday, the co-founder of Zap Protocol Nick Spanos described the incident to be a “false dip” and predicted that Bitcoin could reach US$100,000 by the end of 2021.
Regardless of the action taken upon it—adopting it as legal tender or regulating trades in crypto—it is no doubt that governments around the world are realizing the demand and capacity of cryptocurrency. One thing that crypto owners are absolutely going to pay close attention to is whether those actions will add to the volatility of crypto prices and, in turn, the profits they will make.
Header Image Courtesy of Freepik