Baisakhi MishraUkraine trades more crypto than fiat currency. Now assets like Bitcoin are officially legal. The Ukrainian parliament approved a measure legalizing cryptocurrencies on Thursday, laying the groundwork for the regulation and management of digital assets such as Bitcoin.
Ukraine trades more crypto than fiat currency
Image Source: Fortune
Ukraine’s Deputy Prime Minister and Minister of Digital Transformation, Mykhailo Fedorov, declared on Twitter that “this would legalize crypto exchanges and cryptocurrencies, and Ukrainians will be able to protect their assets from possible abuse or fraud.”
Last September, Ukraine’s parliament enacted a law legalizing cryptocurrencies, but President Volodymyr Zelenskyy vetoed it the following month. According to Zelenskyy, Ukraine cannot afford to build a new regulatory system to manage cryptocurrency.
According to Zelenskyy’s suggestion, the new version of the law on virtual assets, which passed parliament on Thursday, places crypto regulation under the supervision of the National Commission on Securities and Stock Market.
Notably, the bill excludes Bitcoin and other cryptocurrencies from the definition of legal money. Ukraine has not followed El Salvador’s lead, which made Bitcoin an official currency in September of last year. However, the new regulation will provide businesses operating in what was previously a legally murky area peace of mind.
In an official statement, Fedorov added, “Market participants will get legal protection and the chance to make decisions based on open conversations with government agencies.”
Despite the lack of institutional regulation in the past, Ukraine has established itself as Europe’s main crypto hub. In its 2021 Global Crypto Adoption Index, which analyses the amount and value of crypto exchanged in a country, market consultancy Chainalysis ranked Ukraine fourth globally, behind Vietnam, India, and Pakistan.
The New York Times reports that the Eastern European country executes more cryptocurrency transactions every day than it does in its fiat currency, the hryvnia. Meanwhile, Ukraine has a large pool of developers eager to work with blockchain technology. Ukraine is ranked No. 1 for attractiveness in terms of IT outsourcing in 2021, according to Dutch IT firm Daxx, and the best in the world for hiring programmers.
Although shifting tensions with Ukraine’s less crypto-friendly neighbor, Russia, may put a damper on capital inflows, government officials are confident that the new law will draw more international investment into the country’s expanding crypto economy. The media claimed on Thursday that mortar bombs hit a kindergarten in restive eastern Ukraine, with pro-Russia separatists accusing Ukrainian soldiers.
Aside from the fear of conflict, Russia’s economic clout and ambiguity about cryptocurrency could overshadow Ukraine’s openness. Russia is still one of Ukraine’s most important trading partners, and the Russian central bank is working on its own digital currency while lobbying for a cryptocurrency prohibition.
In January, Ukraine’s Deputy Minister of Digital Transformation Oleksandr Bornyakov told Fortune, “Our supportive approach on crypto certainly stands in contrast with neighbors whose politicians propose a ban on the usage and mining of cryptocurrencies. I’d want to remind them that crypto regulation, rather than a prohibition, will be more effective.”
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