Legal regulation of cryptocurrency transactions in Ukraine: implementation problems and development prospects

Abstract

Problem setting. The rapid growth of cryptocurrency circulation in Ukraine and worldwide requires an effective mechanism for the legal regulation of transactions with virtual assets. Cryptocurrencies are used as investment instruments, means of international transfers, exchange and store of value. At the same time, their decentralized nature, cross-border character and technological complexity create challenges for taxation, financial monitoring, banking compliance and protection of market participants’ rights. Although the Law of Ukraine “On Virtual Assets” has been adopted, its provisions have not been fully implemented due to the absence of a special tax mechanism. Therefore, Draft Law No. 10225-d, aimed at regulating the circulation of virtual assets in Ukraine, is of particular importance. Analysis of recent researches and publications. The issues of legal regulation of cryptocurrencies and virtual assets have been studied by Ukrainian scholars, in particular O. O. Dmytryk, A. S. Ovcharenko, A. H. Donets and others. O. O. Dmytryk analyzes the correlation between “virtual assets” and “digital assets”. A. S. Ovcharenko examines the current state of cryptocurrency regulation in Ukraine and the prospects for harmonizing national legislation with international standards. A. H. Donets studies certain aspects of transactions with virtual assets, in particular the virtual asset storage agreement (Crypto Custody). At the same time, the comprehensive implementation of cryptocurrency regulation in Ukraine, especially in taxation, banking compliance, financial monitoring and adaptation of the MiCA Regulation and FATF recommendations, remains insufficiently studied. Purpose of research. The purpose of the article is to study the current state of legal regulation of cryptocurrency transactions in Ukraine, analyze the problems of implementing the relevant legislation and identify prospects for its further development. Article’s main body. The article examines the legal nature of cryptocurrency and its correlation with the broader category of virtual assets. Cryptocurrency is usually understood as a decentralized digital asset based on blockchain technology and cryptographic mechanisms, while Ukrainian legislation more often uses the concept of “virtual asset”. The study analyzes the main types of cryptocurrency transactions, including purchase and sale, exchange, storage, mining, staking, transfers and investment use. It is noted that cryptocurrency is not recognized as legal tender in Ukraine, since the Constitution of Ukraine defines the hryvnia as the national monetary unit. Special attention is paid to Ukrainian legislation in the field of virtual assets, in particular the Law of Ukraine “On Prevention and Counteraction to Legalization (Laundering) of Proceeds of Crime, Financing of Terrorism and Financing of Proliferation of Weapons of Mass Destruction” and the Law of Ukraine “On Virtual Assets”. Although the latter formally defines the legal status of virtual assets, its provisions have not been fully implemented due to the absence of a special tax mechanism. The article analyzes Draft Law of Ukraine No. 10225-d “On Amendments to the Tax Code of Ukraine and Certain Other Legislative Acts of Ukraine Regarding the Regulation of the Circulation of Virtual Assets in Ukraine”. The comments of the Main Scientific and Expert Department of the Verkhovna Rada of Ukraine indicate several problematic aspects, including the combination of amendments to the Tax Code with amendments to other legislative acts, the technological rather than legal and economic definition of a virtual asset, and the need to build taxation rules based on the economic substance of transactions. The article identifies the main problems of implementation: the absence of a comprehensive tax mechanism, uncertainty of the legal nature of virtual assets, inconsistency between tax and special regulation, insufficient clarity regarding virtual asset service providers, difficulties of financial monitoring and the need to protect market participants’ rights. Further development should be based on tax transparency, authorization of service providers, effective AML/KYC procedures, investor protection and harmonization with the MiCA Regulation and FATF recommendations. Conclusions and prospects for the development. The study concludes that the legal regulation of cryptocurrency transactions in Ukraine remains fragmented and incomplete. Ukrainian legislation already contains certain legal constructions necessary for this sphere, including the concept of a virtual asset, financial monitoring provisions, the category of a digital thing and the Law of Ukraine “On Virtual Assets”. However, these elements do not yet form a complete system for regulating cryptocurrency transactions. The key problem is that the Law of Ukraine “On Virtual Assets” has not been fully implemented, since its practical application depends on amendments to tax legislation. Draft Law of Ukraine No. 10225-d is important for launching the legal regime of virtual assets, but it requires further improvement, especially regarding the correlation between tax and special regulation, the definition of virtual assets, taxation rules and guarantees for market participants. Further development of Ukrainian legislation should be based on a balanced regulatory model that takes into account the economic substance of crypto-asset transactions, ensures tax transparency, effective financial monitoring, investor protection and proper state supervision. Harmonization with the MiCA Regulation and FATF recommendations should serve as a guideline for creating a transparent, legal and investment-attractive virtual assets market in Ukraine.