Legislative regulation of virtual assets: expert explains how Ukraine will benefit from it

Investor safety, development of new market segments, simulation of innovation development are not the only advantages of legislative regulation of virtual assets. This opinion was expressed in a commentary to UNN by Olena Sosedka, co-founder of Ukraine's first fintech ecosystem Concord Fintech Solutions.

Details

Sosiedka points to an increase in tax revenues as an obvious advantage of legislative regulation of the circulation of virtual assets. However, according to the expert, these are not all the benefits. We are talking about large-scale benefits:

- Ensuring investor safety: regulation helps protect investors from fraud and other unfair practices. This creates a safer and more transparent environment for investment, increasing confidence in the virtual asset market.

- Preventing Money Laundering and Terrorist Financing: Effective regulation allows governments to better monitor financial transactions and prevent money laundering and terrorist financing through cryptocurrency platforms.

- Stimulate innovation and technological development: Regulation can promote innovation by setting clear rules for companies operating in the field of virtual assets. This could attract more investment in the technology industry and contribute to overall economic growth.

- Strengthening reputation and international status: countries that successfully regulate the cryptocurrency market can strengthen their reputation as financial innovators and reliable members of the international financial community.

- Development of new market segments: legislative support can open the door to new market segments based on virtual assets, such as cryptocurrency exchanges, startups, and blockchain projects, thereby increasing the number of jobs and economic activity in this area.

- Increase financial inclusion: Cryptocurrency regulation can contribute to financial inclusion by allowing citizens who do not have access to traditional banking services to use alternative financial instruments.

- Creating a hub for investors: Effective regulation of the virtual asset market can turn a country into an attractive hub for investors. This creates a stable and predictable environment for capital investment, attracting domestic and international investors interested in innovative financial technologies. Such a hub facilitates not only direct investment, but also the development of a local ecosystem of startups, technology companies, and other entities related to virtual assets.

"The inclusion of this clause emphasizes that effective regulation of the virtual asset market not only increases budget revenues and protects investors, but also contributes to the creation of an investment-friendly environment that can have a positive impact on the country's overall economic development," the expert believes.

Read more about cryptocurrencies in the article: Bitcoin is predicted to grow at an unprecedented rate: an expert talks about the impact of cryptocurrencies on the traditional financial sector and prospects for Ukraine

Recall

In 2022, the Verkhovna Rada passed the draft law "On Virtual Assets" (No. 3637), which was to come into force only after changes to the Tax Code. However, the President vetoed it with a number of amendments.

In addition, no changes were made to tax legislation. On November 7, 2023, a draft law on the regulation of the turnover of virtual assets in Ukraine (No. 10225), developed by the National Securities and Stock Market Commission (NSSMC), was registered in the Parliament.

The draft law proposes to tax profits from crypto market activities at a rate of 18% and a military fee of 1.5%. On November 17, the Ministry of Digital Transformation introduced an alternative draft law (No. 10225-1), which, in particular, proposes to set the personal income tax at 18%. However, the tax will be introduced gradually: the first three years will see a rate of 3%, and the next five years - 9%.

The right to the rates provided for in this clause will be granted to those personal income taxpayers whose investment income from transactions with virtual assets does not exceed UAH 7 million during one reporting year.