Ukraine has begun formal steps to legalize the crypto industry, shifting from a largely unregulated market to one with a defined legal status.
On Sept. 3, Ukrainian lawmaker Yaroslav Zhelezniak revealed that he and his colleagues approved a bill that legalizes and taxes the use of digital assets in the country.
According to him, the draft bill introduces a tax framework that makes transactions subject to an 18% income levy and a 5% military contribution.
To encourage compliance, the bill offers a one-year window during which withdrawals converted to fiat currency would be taxed at just 5%.
He added that regulators for the space have yet to be named, with both the National Bank of Ukraine and the National Securities and Stock Market Commission being considered.
Meanwhile, he pointed out that new revisions would be made to the bill before the second reading.
Ukraine’s crypto industry
The legislative move comes as Ukraine faces mounting pressure to bring its crypto sector under tighter oversight.
A recent study by the Royal United Services Institute (RUSI) suggested the country could recover up to $10 billion by building a more robust regulatory system.
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According to the report, the country’s thriving over-the-counter markets have become a focal point for illicit financial flows, including purchasing restricted military components, using money-mule networks, and gaps in donor verification rules.
The report linked these weaknesses to broader geopolitical risks, warning that they create opportunities for foreign actors to launder money into politics and undermine democratic systems.
Experts at the institute also cautioned that Russian intelligence may be exploiting Ukraine’s wartime distractions to channel illicit funds through local intermediaries.
Considering this, the report argued that Ukraine risks being perceived as a hub for crypto-based money laundering without stronger oversight, which would damage its financial stability and international partnerships.
The report comes at an exciting time, as Ukraine ranks among the world’s most active crypto users. Data from Chainalysis placed the country in the global top ten for adoption and first in Eastern Europe.
That high level of retail and institutional activity has given lawmakers added urgency, as crypto regulation is now seen as necessary to capture tax revenue and shield the economy from illicit activity.