Cryptocurrency and the law
The omnipresence of the Internet in the life of a modern person affects literally everything. This has led to the emergence of the digital financial system, an element of which is virtual money, which has become widespread in the global economy. Today, you can even pay for a cup of coffee with it.
Cryptocurrency legislation in Ukraine
Between 2014 and 2018, the Ukrainian authorities completely ignored crypto, considering it to be counterfeit. This can be seen in resolutions and letters from state regulators. However, in 2018, the situation changed and a number of bills were submitted to the Verkhovna Rada to regulate the circulation of virtual assets.
Subsequently, a bill was registered in the Ukrainian parliament that proposes to recognize crypto as program code and tax such currency. The very procedure for taxing mining operations and crypto exchange. This draft law also included provisions on the free circulation of digital assets and their exchange for goods or other material assets.
Finally, on October 8, 2021, the Verkhovna Rada passed a law on crypto legalization. Holders of virtual funds were able to legally exchange and declare them, as provided for by cryptocurrency legislation in Ukraine. This was the beginning of digital assets in the country.
Legalization of cryptocurrencies in Ukraine
On February 17, 2022, the Ukrainian parliament adopted the Law on Virtual Assets, which was subsequently signed by the president. The document provided for the following provisions:
- legalization of crypto;
- creating conditions for the formation of a legal environment in the crypto market;
- identification and registration of service providers;
- introduction of financial monitoring of crypto.
Thus, this law fully formalized the legalization of cryptocurrencies in Ukraine. But now it is necessary to make some changes to the tax legislation for the normal functioning of crypto circulation in the market, as noted by the Ministry of Digital Transformation.
Regulation of ICOs and cryptocurrency exchanges
In civilized countries, cryptocurrency is a legal payment method, but Ukraine has recently passed a law that provides for the circulation of virtual assets. This bill has already been signed by the president, so with the adoption of amendments to tax legislation, the situation will change dramatically. Experts hope for legal regulation of ICOs and cryptocurrency exchanges, as well as the emergence of international crypto platforms.
But not everything is so simple with the protection of crypto investors. On the one hand, there is an adapted legislation and the Constitution of Ukraine that does not prohibit crypto, and on the other hand, there is a cautious position of government agencies regarding crypto. There are some court decisions on cryptocurrencies in Ukraine, which show that judges have different attitudes towards crypto.
One court recognizes cryptocurrency as a virtual thing and denies the plaintiff legal protection, while other courts recognize the publicity and legality of an electronic transaction and confirm the obligations of the counterparties under the contract. It turns out that the court recognized the legal nature of crypto as a title deed.
Legal aspects of cryptocurrency taxation
The new law on crypto signed by the president should expand the list of taxable objects. In other words, lawmakers want to introduce a tax on income from transactions and other types of alienation of virtual assets. Taxpayers will be given the opportunity to separately indicate the total financial result from these transactions.
Individuals will keep a separate record of crypto transactions, which can be used to record profits for the reporting year. That is, they can take into account the costs of acquiring digital funds.
Cryptocurrency transactions of individual entrepreneurs under the general taxation system are taxed as transactions of ordinary individuals. However, sole proprietors of the single tax system are only proposed to be granted permission to engage in activities related to the turnover of virtual assets. In other words, the Law provides for legal aspects of cryptocurrency taxation for all groups.
Consumer protection in cryptocurrencies
Legislation on the circulation and regulation of cryptocurrencies, as well as on taxation, has been adopted, but nothing has been decided on consumer protection. In many transactions, bitcoins and other types of cryptocurrency remain unrecognized as a means of payment, meaning that it is not yet possible to pay for services or purchase goods with them.
And all this despite the ready-made legislation. Interestingly, even judges are divided on this issue. Some consider crypto to be a legal means of payment under electronic contracts, while others recognize it as virtual things and refuse to consider it.
It turns out that consumer protection in cryptocurrencies requires a separate legislative definition. This is a very important step that should be taken together with changes to the tax legislation to legalize cryptocurrencies.