Legalization of crypto in Ukraine

There will be a legal crypto market in Ukraine! Market participants themselves, the state and our international partners are interested in this. The bill, designed to normalize the new digital reality, bring funds to the state budget, protect “professional” crypto market participants and secure individuals who own crypto assets, as well as bring Ukraine closer to the digital West, was ready for consideration in parliament back in April, but was voted on in the first reading only on September 3.

Without going into details of why the NSSMC leadership did not like the bill, which apparently was the reason for the almost six-month delay, there is reason to believe that the parliament’s increased activity on this issue was the result of pressure from international partners.

What will the crypto market look like in Ukraine?

What the crypto market in Ukraine should look like (in the opinion of people's deputies) was described in detail and publicly by the head of the parliamentary committee on finance, tax and customs policy Danylo Getmantsev.

The bill, adopted in the first reading, provides, in particular:

1. The definition of a virtual asset is a special type of digital object (property) that exists in electronic form thanks to distributed ledger technology (blockchain).
2. Ownership of virtual assets is acquired through emission, transaction, law or court decision and is evidenced by the possession of access means, such as cryptographic keys. The law provides for a presumption of legality of ownership, unless otherwise established by the court.
3. A public offering of a virtual asset requires the preparation of a so-called “white paper” – a document with detailed information about the asset, issuers and risks. Admission to trading on trading platforms is also regulated by clear procedures, including authorization and disclosure of information. The “white paper” is a mandatory document for a public offering, which must be truthful, clear and not misleading. Marketing communications must be consistent with this information, contain risk disclaimers and not be distributed until the “white paper” is made public.
4. Providers of services related to the circulation of virtual assets (storage, trading, transfer, etc.) must be authorized, meet organizational and financial requirements and ensure customer protection.
5. Asset owners and clients are protected through transparency, disclosure and measures against insider trading, market manipulation and illegal disclosure of information.

The project divides all virtual assets into three main categories:

1. Asset-backed tokens – their value is stabilized by linking them to assets such as currency or property;
2. Electronic money tokens are tied to one of the official currencies;
3. Other virtual assets is a category that covers assets that do not fall into the first two types.

According to the bill, the market regulator will determine which virtual assets (except for asset-linked tokens and electronic money tokens) will fall into this category.

The issue of taxation is defined separately; the bill provides for:

• for personal income tax:
  • maintaining separate (from other income and other investment profits) taxation of income from transactions with virtual assets;
  • taxation of profits from transactions with virtual assets received during the year as the difference between the income from the sale and the expenses for the acquisition of virtual assets during the year;
  • an individual must declare income and pay taxes himself;
  • are not subject to tax:
    • income from transactions involving the exchange of virtual assets for other virtual assets, as well as income from the sale of virtual assets within the limits of one minimum wage;
    • the value of virtual assets obtained as a result of their issue (creation) or gratuitous transfer from their issuers or offerors and/or received solely in exchange for the personal data of an individual;
  • losses incurred in previous periods (if sold cheaper than bought) are taken into account until they are repaid (with some exceptions);
  • for virtual assets acquired before this law comes into force, if they are sold during 2026, individuals will have the right to choose a preferential personal income tax rate of 5%.
• for corporate income tax:
  • new differences are introduced to adjust the financial result (similar to how transactions with securities are taxed);
  • The list of expenses taken into account when making transactions with virtual assets is determined by the Ministry of Finance based on the regulator’s submission.
• under the simplified taxation system:
  • payers of a single tax are prohibited from transactions with virtual assets;
  • Providers of services related to the turnover of virtual assets are not entitled to use the simplified taxation system.
• in terms of administration:
  • service providers related to the turnover of virtual assets, providing services to residents of Ukraine, are required to register with regulatory authorities and provide an annual report on transactions with such assets in relation to individuals and legal entities who are residents of Ukraine (this is a step towards the gradual implementation of CARF and the implementation of the DAC8 directive);
  • Failure to comply with these obligations will result in fines for service providers related to the circulation of virtual assets, applied in reduced amounts during the transition period (in 2026 – 10% of the established fine amount, during 2027-2029 – 25% of the established fine amount).

It is expected that the above changes to the Tax Code will come into effect on January 1, 2026.

"This is a question of establishing clear rules of the game for market participants. Legalization of crypto can potentially have a significant effect on the budget. According to the Global Ledger study on tax potential, if the crypto market had been legalized earlier, the state could have received about UAH 8.34 billion in taxes from crypto exchanges registered in Ukraine (at a rate of 18%) and another UAH 6.53 billion from taxation of citizens' incomes in 2021-2024," Danylo Getmantsev, head of the parliamentary committee on finance, tax and customs policy of the Verkhovna Rada of Ukraine, cites figures.

Today, there are no professional participants in the cryptocurrency market in Ukraine, since there is no regulatory framework for them.

“There are exchangers, traders, but they are outside the legal field and are in no way regulated or controlled by the state. Today, there are no special taxation rules for either individuals or legal entities in terms of working with virtual assets,” says Alexandra Nikitina, a lawyer, expert in international taxation and cryptocurrency regulation, and partner at Ecovis Bondar & Bondar Law Bureau, in a comment for Delo.ua.

The bill provides for mandatory authorization of service providers with virtual assets for 9 types of activities. Authorization is, in fact, an analogue of a license, a permitting procedure that every market participant who wants to become a professional participant must go through.

"If you want to buy a car, you can't do it directly by paying with crypto. You have to do it through processing platforms that have received authorization. Until such authorized providers exist, you basically don't have the right to pay with crypto for any services and goods in the real world," the publication's interlocutor explains.

The document also provides for mandatory authorization of token issuers and, accordingly, prohibitions on the circulation of tokens issued by their unauthorized issuers.

Mandatory reporting is provided for all professional market participants who are authorized. They are required to register with the State Tax Service and annually, by January 31 of each year following the reporting year, report on the transactions of individuals and legal entities and their income and expenses.

"The law introduces a procedure by which the Tax Service will receive information about transactions of individuals and legal entities with virtual assets. This is necessary so that the Tax Service can control the proper declaration of income. This is something that does not exist today in the banking sector," says Nikitina. According to her, the law effectively "cancels" the myth of the anonymity of crypto.

A simplified authorization procedure for foreign providers is being introduced. If a foreign provider wants to work with a resident of Ukraine, it is obliged to be authorized by the Ukrainian regulator. The consequences of non-authorization will be the fact that the Tax Service will not allow expenses on transactions with virtual assets for unauthorized providers to be taken into account. Accordingly, this will have tax consequences for users.

"If you are dealing with an unauthorized provider, you will not be allowed to account for the costs of acquiring a particular virtual asset. What will this lead to? To the fact that the income received from the sale will not be reduced by the costs associated with the acquisition of such an asset," the expert explains.

Taxation Features

The law provides for taxation of transactions with crypto assets according to the same principles that currently apply to investment assets – shares, bonds, other securities, derivatives, etc. It is the profit of an individual from the sale of a crypto asset for fiat money that is taxed.

Taxation of legal entities occurs not only in the case of the sale of virtual assets, but also in the case of their exchange. The tax rate is standard – 18% + 5%.

“Sole proprietors are prohibited from dealing with crypto at all. Simplified taxpayers – legal entities – are also prohibited from dealing with crypto. Residents of Diia.City who have chosen the withdrawn capital tax regime, if they carry out transactions with virtual assets, are required to switch to the general taxation system,” explains Alexandra Nikitina.

During the first year from the entry into force of the law (it is assumed that this will be 2026), individuals will have the right to declare income from the sale of virtual assets and pay income tax excluding expenses for the acquisition of virtual assets at a rate of 5% personal income tax + 5% military tax.

Virtual assets of individuals received free of charge (including as a result of mining, staking, as a gift) are not taxed at the stage of receipt. However, when selling such assets, the entire amount of income will be taxed, without deducting expenses.

When selling virtual assets, alienating them in favor of related persons, or transferring them in any other way other than selling for money, legal entities lose the right to take into account the costs of acquiring these assets when calculating taxes.

Accounting for transactions with virtual assets for both individuals and legal entities is conducted separately from all other transactions, again by analogy with investment assets.

The tax return is submitted independently. Service providers and issuers of virtual assets are not tax agents. An individual must independently calculate, declare and pay the tax based on the results of the year.

Protecting Crypto Asset Owners

In Ukraine, no one can guarantee the protection of their property rights to owners of virtual assets. This is happening, of course, due to the lack of any legislative regulation of this market. According to Alexandra Nikitina, authorization of professional market participants is intended to solve this problem.

"Currently, crypto assets are bought for cash or through P2P transactions, where the purpose of payment does not mention crypto. Accordingly, it is impossible to prove that you bought a crypto asset and that it belongs to you. That is, the issue here is not that there are no control tools. The issue here is that the owners buy crypto illegally and, accordingly, then have no way to protect themselves," the lawyer explains.

Authorized providers will be responsible for the proper storage of virtual assets. The authorization process itself will include a procedure for verifying that the provider has all the necessary technical infrastructure to ensure the protection of user rights.

"And this is precisely what the authorization procedure is for. There are a bunch of technical requirements that are set for providers so that assets are protected. If the user interacts with an unauthorized provider at his own risk, then this is his own risk," explains Nikitina.

Market participants also say that legislative regulation of the virtual asset market will ensure the protection of the rights of crypto owners and reduce the risks of fraud and illegal transactions.

“We have long been openly advocating for the development of clear and understandable rules for the crypto industry and are cooperating with legislators to create conditions that can provide a clear and acceptable framework for cryptocurrency transactions and reduce risks for investors and users,” says Kirill Khomyakov, regional head of Binance in Central and Eastern Europe, Central Asia and Africa, in a comment for Delo.ua.

According to him, legislative regulation not only creates a balance between industry participants, but also actively promotes the sustainable development of the crypto industry, and also provides an opportunity to offer more services to users, such as bank fiat channels, crypto cards, etc. And, of course, market regulation will lead to an increase in the level of trust in crypto assets among the population.

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