Ukraine's 23% Crypto Tax Aims to Curb $10B in Illicit Flows

Ukraine’s parliament passed the first reading of a bill to legalize and tax cryptocurrencies, marking a pivotal step in the nation’s efforts to regulate a rapidly growing digital asset market. The legislation received 246 votes in favor, with only one vote against, according to multiple reports [1][4]. The bill outlines an 18% income tax on profits derived from virtual assets and includes a 5% military tax, effectively creating a 23% combined tax rate on crypto earnings [1][5]. Additionally, a preferential 5% tax rate is proposed for the first year on fiat conversions, easing the transition for investors [1][4].

The initiative aligns with recommendations from Ukraine’s financial regulator and aims to bring the country’s crypto tax system in line with international standards, particularly those of crypto-friendly nations [1]. Lawmaker Yaroslav Zhelezniak, who announced the bill’s passage on his Telegram channel, emphasized that the current version will undergo significant revisions before the second reading, including the designation of a regulatory authority between the National Bank of Ukraine (NBU) and the National Securities and Stock Market Commission [1][5].

Ukraine has long been a leader in crypto adoption, ranking eighth globally in Chainalysis’s 2025 Global Crypto Adoption Index. The country has seen high levels of retail and institutional participation in centralized and decentralized finance, with particular strength in DeFi value received [1]. However, despite this widespread usage, the market has remained largely unregulated, contributing to significant revenue losses from illicit flows. The Royal United Services Institute (RUSI) estimates that Ukraine has lost at least $10 billion in stolen funds and untaxed crypto transactions due to the absence of robust regulatory frameworks [2]. The new legislation is expected to curb these losses and enhance financial transparency, especially in a war-torn economy reliant on foreign aid and internal revenue generation.

The urgency for regulatory action has been underscored by concerns over financial vulnerabilities exacerbated by the ongoing conflict with Russia. RUSI highlighted risks including money laundering, illicit financing of sanctioned military components, and exploitation through “money mule” schemes that cost the country an estimated $24 million monthly [2]. These issues have intensified calls for urgent reforms to align with European standards and avoid potential downgrades from the Financial Action Task Force [2].

Ukraine’s efforts to formalize its crypto framework follow a broader global trend, with countries like Denmark, Brazil, and the United States advancing their own crypto tax policies. The Ukrainian bill also reflects a shift in domestic financial strategy, aiming to integrate digital assets into the national economic fabric rather than treating them as a separate or secondary market [3]. As the legislation moves forward, it will require further parliamentary approvals and potential adjustments to address inconsistencies with EU regulations, which have previously hindered similar initiatives [4].

The passage of the first reading represents a critical milestone for Ukraine’s crypto market. While the path to full legalization and implementation remains complex, the move signals a commitment to stabilizing the sector and leveraging its economic potential during a period of geopolitical and financial uncertainty.

Source:

[1] Ukraine's Parliament Supports Crypto Tax Bill at First Reading (https://cointelegraph.com/news/ukraine-crypto-legalization-taxation-bill-first-reading)

[2] Ukraine parliament passes first reading of crypto legalization bill with 23% tax rate as country faces $10B losses from illicit flows amid wartime vulnerabilities (https://finance.yahoo.com/news/ukraine-parliament-passes-first-reading-102435792.html)

[3] Ukraine Moves to Legitimize Crypto With New Tax Framework (https://cryptodnes.bg/en/ukraine-moves-to-legitimize-crypto-with-new-tax-framework/)

[4] Ukraine's lawmakers vote to legalize crypto (https://www.cryptopolitan.com/ukraines-lawmakers-vote-to-legalize-crypto/)

[5] Ukraine's parliament backs bill to legalize, tax virtual assets in first reading (https://kyivindependent.com/parliament-backs-draft-law-to-legalize-tax-virtual-assets-in-first-reading/)