Ukraine Legalizes Crypto, Aims for 2025 Regulated Market

Ukraine has emerged as a crypto-friendly nation, with a tech-savvy population and progressive government support driving the enthusiastic adoption of cryptocurrencies. The country is set to continue the legalization and regulation of digital assets starting in 2022, aiming to foster innovation while protecting consumers. For investors, startups, and crypto users, understanding the emerging regulatory environment in Ukraine is crucial. New laws, licensing frameworks, and tax provisions are on the horizon, and staying informed is essential to avoid missing out on opportunities.

The oversight of the crypto space in Ukraine is primarily shared among three main authorities: the National Commission on Securities and Stock Market (NSSMC), the National Bank of Ukraine (NBU), and the Ministry of Digital Transformation. These institutions collectively shape Ukraine’s cryptocurrency policy and regulatory infrastructure. Historically, Ukraine’s attitude towards cryptocurrency was cautious. In 2014, the NBU declared Bitcoin a ‘money surrogate’ and warned about its use as legal tender. For years, crypto operated in a legal gray area, tolerated but unregulated. However, this began to change in 2017–2018 when regulators started working on a framework to address the potential of crypto and its risks. Early legislation was drafted defining virtual assets, introducing a mechanism of taxation, and creating a cybersecurity working group.

In September 2021, the Ukrainian parliament passed the Law ‘On Virtual Assets,’ which officially recognizes digital assets. In March 2022, President Zelensky signed it into law but revised the legislation to pave the way for a regulated crypto market in Ukraine. This transformation from skepticism to legalization reflects Ukraine’s efforts to balance innovation with regulatory control. The key regulatory authorities in Ukraine include the NSSMC, which oversees virtual assets, issues licenses, and sets regulatory policy; the NBU, which handles digital assets with currency-like functions and monitors financial stability; and the Ministry of Digital Transformation, which coordinates digital innovation and crypto development policy.

All Virtual Asset Service Providers (VASPs), including exchanges, wallet providers, and custodians, must obtain licenses from the NSSMC. Ukrainian firms pay licensing fees of approximately €1,500–3,000, with higher fees for foreign applicants. Until enforcement begins, foreign platforms may still operate if they follow Ukrainian AML laws. Ukraine’s AML framework requires KYC verification, transaction monitoring, suspicious activity reporting, and adherence to FATF standards. Enforcement is coordinated by the State Financial Monitoring Service and financial regulators. Profits from crypto trading will be taxed under Ukraine’s standard tax code, with an 18% income tax for individuals, a 1.5% military levy, and an 18% corporate tax for businesses. Crypto-to-fiat conversions trigger tax obligations, but simple wallet transfers are not taxable. Transactions may be exempt from VAT, aligning with EU practice.

Ukraine’s law distinguishes between utility tokens, regulated under the Virtual Assets law, and security tokens, which may fall under securities law and require NBU/NSSMC oversight. ICOs and STOs must comply with disclosure, licensing, and AML obligations, depending on token classification. Ukraine does not recognize crypto as legal tender but permits ownership, trading, and private transactions. Businesses can accept crypto through mutual agreement, with the value reported in UAH for accounting. Mining is legal and unregulated, requiring no license, as long as miners comply with general business and energy regulations. The government has initiated several crypto-related projects, including the development of the e-hryvnia as Ukraine’s future central bank digital currency, accepting crypto donations during the war, and launching government-sponsored NFT campaigns to fund humanitarian and defense efforts.

Unlicensed crypto operations or failure to meet AML standards can result in fines, business closure, and criminal prosecution for severe violations such as fraud or laundering. Ukraine fosters crypto innovation through proposed regulatory sandboxes for startups, Diia.City, a tech-friendly legal framework offering reduced taxes and flexible regulations for IT and crypto companies, and public-private collaboration with major crypto firms for regulatory development and educational initiatives. Crypto is increasingly integrated into retail, tech, and freelance sectors, with support from government-sponsored hackathons and blockchain pilots. However, regulatory delays, institutional resistance, enforcement difficulties, and public perception pose notable challenges. Although the Law “On Virtual Assets” was passed in 2022, it remains unenforced due to pending tax code amendments, delaying full licensing and compliance implementation. Conservative elements in the government have slowed crypto liberalization, citing financial risks and wartime instability. Without operational licenses, oversight of foreign exchanges and DeFi platforms is limited, complicating AML efforts.

Initially skeptical due to scams and lack of clarity, public sentiment has shifted positively after successful crypto donations during wartime. Today, Ukrainians are cautiously optimistic, expecting clear rules and fair taxation. Recent developments include competing bills aiming to finalize crypto tax laws and launch the regulated market by 2025, and Ukraine aligning with EU MiCA standards to harmonize regulations with Europe. The future outlook includes full implementation of licensing and tax regimes, legal recognition of crypto businesses under Diia.City, the potential launch of the e-hryvnia CBDC, and closer integration with EU crypto policy. Ukraine’s progress is likely to influence regional policy, particularly in post-Soviet states, and successful regulation could position Ukraine as a crypto hub in Eastern Europe. Ukraine’s journey around crypto regulation has been one of transition from the tenuousness of the law to proactive laws, approaching a well-regulated and innovation-friendly crypto environment with government-endorsed crypto initiatives, emerging Virtual Assets law, and future conformance with EU MiCA standards. Stakeholders in or looking to enter Ukraine’s market should stay informed about licensing requirements, tax changes, and the timing of enforcement to remain compliant and competitive. The crypto regulation is changing rapidly, and to be successful in the long term, one needs to keep up with the latter.