Ukraine Set to Legalize Cryptocurrencies by 2025 with Standard Taxation Framework

Ukraine is on track to legalize cryptocurrencies by early 2025, with legislation currently under review by the Verkhovna Rada (the Ukrainian Parliament). According to Daniil Getmantsev, the head of the tax committee, the new legal framework will regulate digital assets without offering special tax incentives, applying standard taxation rules to cryptocurrency transactions.

The draft bill, which is expected to be finalized in coordination with the National Bank of Ukraine (NBU) and the International Monetary Fund (IMF), aims to establish a clear regulatory environment for cryptocurrencies while ensuring fiscal oversight. It is anticipated that the law will be ready for its first parliamentary reading in the first quarter of 2025.

Standard Taxation for Crypto Transactions

While there had been initial speculation about potential tax breaks to encourage crypto investment, the legislation will instead follow a conventional approach, taxing all profits from crypto transactions when they are converted into fiat currency. This means that cryptocurrency gains will be subject to capital gains tax, similar to how securities trading profits are taxed.

Getmantsev emphasized that Ukraine's cautious stance on tax incentives is rooted in concerns about potential tax evasion. By applying standard tax rules, the country seeks to minimize risks associated with tax avoidance while ensuring that revenue from crypto-related activities contributes to the government’s budget.

A Strategic Move Amid War and Financial Disruptions

The move to legalize cryptocurrencies is seen as an important step for Ukraine, particularly amid the ongoing conflict with Russia. Legalized crypto operations could offer Ukrainians a regulated means of accessing financial support, safeguarding assets from inflation, and facilitating cross-border transactions. In a time when traditional banking systems may face disruptions due to the war, cryptocurrencies have already played a crucial role in humanitarian aid and donations, as well as in maintaining financial stability during the crisis.

The proposed legislation aims to regulate digital asset transactions while focusing on financial stability and Anti-Money Laundering (AML) measures. This will create a transparent, legally secure framework for businesses and investors involved in the crypto space. Ukraine's efforts to establish a clear regulatory environment align with the increasing prominence of decentralized finance (DeFi) in Eastern Europe, where digital asset activity has been growing rapidly.

A Growing Crypto Landscape in Eastern Europe

According to data from Chainalysis, Eastern Europe saw more than $499 billion in crypto transactions between July 2023 and June 2024, signaling the rising importance of digital assets in the region. Ukraine’s move to legalize cryptocurrencies will position the country as a potential hub for regulated digital asset trading in Eastern Europe.

No Special Tax Incentives

In contrast to other countries that have introduced tax breaks or incentives to attract cryptocurrency investments, Ukraine’s regulatory framework will not include such measures. Getmantsev explained that the committee is wary of creating tax incentives, as they could be exploited for tax evasion. By focusing on standard taxation, the Ukrainian government aims to ensure that crypto transactions remain transparent and contribute to the country's financial system.

Morocco’s Crypto Legalization Plans

While Ukraine is moving forward with its own cryptocurrency regulations, other nations are also making strides in regulating digital assets. Morocco, which banned cryptocurrencies in 2017, is now preparing to legalize them. The country's central bank, Bank Al-Maghrib, has been working on a draft law to regulate cryptocurrencies, with Governor Abdellatif Jouahri confirming that the law is in the process of adoption. This shift comes at a time when interest in Bitcoin and other digital currencies is growing, with Bitcoin's value approaching $100,000 in late November 2024.

In addition, Bank Al-Maghrib is exploring the possibility of introducing a central bank digital currency (CBDC) as part of its efforts to enhance public policy objectives.

The Global Trend Towards Crypto Regulation

Ukraine's move to legalize cryptocurrencies reflects a broader global trend, with more countries seeking to establish clear regulatory frameworks for digital assets. As the crypto market continues to evolve, nations like Ukraine and Morocco are positioning themselves to harness the benefits of cryptocurrency trading and blockchain technology while ensuring that these activities are conducted within a secure and transparent legal environment.

For Ukraine, the legalization of cryptocurrencies is a significant step toward modernizing its financial system, supporting its wartime economy, and capitalizing on the growing digital asset market in Eastern Europe. As the legislation progresses, all eyes will be on how it shapes the future of crypto in the region.