New life of cryptocurrency in Ukraine: key points about the draft law
What has always had great value and has long been considered the ultimate safe-haven? Gold. This asset was used in times of political, social and economic uncertainty, because it was expected to be stable or even grow in value when other assets fall. It seems to me that many are already tired of talking about how technological the world is becoming, and what impact the pandemic has had on this process. However, it’s difficult to ignore such significant shifts in people’s habits and behavior.
Recently, the leading independent financial advisory organisation deVere Group conducted a study, according to which more than two-thirds (67%) of the 700+ millennial clients surveyed prefer Bitcoin to gold as a safe-haven asset. The respondents are the company’s clients from all over the world who were born between 1980 and 1996. It’s worth remembering that millennials are becoming more active and important consumers.
At the same time, the high volatility of bitcoin and its uncertain future still raise doubts among people — today a person is unlikely to invest all his or her savings in cryptocurrency. However, this is only for today, because the relevance and the interest in virtual assets as means of exchange, a decentralized currency and a safe haven asset is growing rapidly, and the outgoing 2020 may become one of the key years in the monetary relations changes. On this basis, the experience in operating and regulating virtual assets is crucial for every country.
Back to Ukraine
Let’s be honest, the need to develop and pass the virtual assets act in Ukraine has been an important issue for a long time. The Verkhovna Rada adopted in the first reading the draft law №3637 “On Virtual Assets”. This is definitely a big advantage for both market participants and consumers.
The processes which in fact already existed in Ukraine and formed a fairly large and profitable market segment will now work within the legal framework. If earlier there was a lack of mechanisms for taxation of income received from transactions with virtual assets, now the millionth market will work on the same terms as other markets.
The law provides for the comprehensive settlement of legal relations in the virtual assets market. The responsibility for violations in the virtual asset market is specified. This is very important, because users sometimes face fraud on crypto exchanges — the money for a crypto is sent, but no virtual asset is received.
However, many processes still need to be considered and settled, for example, licensing terms, operating procedures, etc. The most interesting issues of the virtual assets functioning in Ukraine will be laid down in the corresponding secondary legislation.
Moreover, it’s necessary to finalize the Ukrainian legislation in the AML field to launch cryptocurrencies in a proper way and to the full capacity. FATF member states have a list of mandatory regulation requirements for the virtual asset market. Their implementation will provide adequate measures to prevent their use for criminal purposes.
Our country currently complies with about a quarter of the FATF requirements. Not bad already, but there is still a lot of work. First of all, the draft law must be agreed with the National Bank of Ukraine, which hasn’t yet recognized cryptocurrency as a currency. Secondly, it’s important to finalize the regulatory base and tighten control through the use of reliable statistics.
Why is this so important? Because Ukraine may be blacklisted by the FATF, which is fraught with consequences for international financial transactions in all sectors of the economy. The last time we were there was in 2011.
In general, the adoption of the draft law “ On Virtual Assets” provides new opportunities for market participants — but only if it’s followed by a comprehensive revision of the issues described above.