On March 16, 2022, Ukraine achieved a significant milestone in the development of the cryptocurrency market by legalizing the sector in the country. President Volodymyr Zelensky signed the law that not only defines digital crypto-assets and their roles in the market but also eliminates several taxes on virtual assets and imposes a uniform 2 percent tax on overall transactions. Under this law, foreign and domestic cryptocurrency exchanges can now operate legally, and banks are permitted to open accounts for Ukrainian crypto companies. This legislation represents the first of many laws required to regulate digital assets in Ukraine and brings structure to the previously unregulated gray market activities of cryptocurrencies.
How Ukraine is Responding to the Growing Crypto Market
On April 30, 2022, Ukraine launched a website for NFT and crypto donations to support humanitarian aid programs in the country through the non-profit Aid for Ukraine. The website accepts both NFT proceeds and crypto donations from users.
Also on April 30, Elon Musk was inducted into Ukraine NFT museum’s ‘Hall of Fame’ as the first public figure to support Ukraine during the ongoing war with Russia. The virtual gallery will feature other celebrities and public figures who have contributed to the cause.
On April 25, 2022, Ukraine announced a ban on residents buying digital assets using the Ukrainian Hryvnia. The purchase of crypto can only be made using foreign currencies, with a monthly limit of 100,000 Ukrainian Hryvnia, equivalent to about $3,400.
On March 16, 2022, Ukrainian President Volodymyr Zelenskyy signed a law officially legalizing cryptocurrencies, allowing foreign and Ukrainian crypto exchanges to operate legally in the country.
Crypto Taxation and Mining in Ukraine
The taxation of crypto transactions in Ukraine is categorized as business activity, and income from these transactions is subject to a personal income tax of 18% and a military tax of 1.5%. In addition, individuals’ income from crypto transactions is taxed at a 5% personal income tax rate for a period of five years.
The sale of cryptocurrencies and intermediary services relating to the creation and circulation of virtual assets are exempt from value-added tax (VAT) in Ukraine.
Crypto mining in Ukraine exists in a legal grey area. Some individuals start crypto mining at home and earn a few dollars every day, while others seeking larger profits establish large-scale warehouses filled with rows of computers and video game consoles connected together to mine cryptocurrency. Young tech specialists in Ukraine have shown great interest in crypto mining, with an average earning of $2,300 per month, which is significantly higher than the country’s average monthly salary of $600.
Conclusion
In recent years, Ukraine has made significant strides in regulating and developing its cryptocurrency market. The country’s move to legalize cryptocurrencies in March 2022 marked a significant milestone, allowing foreign and domestic cryptocurrency exchanges to operate legally and providing structure to the previously unregulated gray market activities of cryptocurrencies. Ukraine’s response to the growing crypto market is evident in the launch of a website for NFT and crypto donations and the induction of Elon Musk into the Ukraine NFT museum’s ‘Hall of Fame’ as the first public figure to support Ukraine during its ongoing war with Russia. However, the country also announced a ban on residents buying digital assets using the Ukrainian Hryvnia, with purchases limited to foreign currencies and a monthly limit of 100,000 Ukrainian Hryvnia. The taxation of crypto transactions in Ukraine is categorized as business activity, with income from these transactions subject to a personal income tax and military tax. Despite being in a legal gray area, crypto mining has gained immense popularity among young tech specialists in Ukraine, with average earnings higher than the country’s average monthly salary. Overall, Ukraine’s response to cryptocurrencies has been both progressive and cautious, balancing the potential benefits of crypto with the need for regulatory oversight.
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