A New Crypto-Haven for Tezos Projects? Ukraine’s Law on Virtual Assets Analyzed
On September 8, Ukraine’s parliament passed the law on virtual assets. We have analyzed it and translated its most important provisions from legal into human-readable and from Ukrainian into English.
In a nutshell, the law entitles local and foreign companies to work with crypto: accept deposits, store customer keys, and open special bank accounts. DEX, farms, NFT marketplaces, and other DeFi projects can now become licensed and work legally. Thanks to that, Ukraine can become a real crypto-haven for DeFi on Tezos and any other blockchain.
Cryptocurrency according to the new law
TL;DR: one can buy and sell crypto but it is not a legal tender. The owner of the wallet key is considered the owner of the cryptocurrency in question.
The law “On virtual assets” actually never mentions the word “cryptocurrency” but “a virtual asset,” which is defined as a non-material good subject to civil rights, having a value, and represented as an array of data. Therefore, not only cryptocurrency and tokens but even in-game items like CS:GO skins can theoretically be subject to the definition.
The law offers two kinds of virtual assets.
Non-collateralised assets are tokens whose owner cannot demand an exchange for property from the issuer. Cryptocurrencies like tez or BTC, as well as NFTs, go in this category.
Collateralised assets are tokens whose owner can demand an exchange on other civil rights objects from the issuer: these are fiat-pegged stablecoins, algorithmic stablecoins, and LP tokens.
The owner of a virtual asset is someone who has the key to the wallet where the asset is stored. There’s no need to call your lawyer to transfer crypto: the law allows for recording the change of ownership in the system, enabling the turnover of virtual assets. In a word, a record in the blockchain and the presence of the key are enough to prove the property rights for crypto.
Ukrainian nationals can exchange crypto for another crypto, the country’s national currency hryvnia, as well as other currencies and values approved by the National Bank. They will also be able to open bank accounts for operations in crypto. Ukrainian banks might issue bitcoin cards to automatically convert crypto into fiat.
Ukrainians will also be able to legally hold an ICO or any other public offering of tokens. They will have to publish info on the ICO’s owner, the token’s description, purchasing conditions, and information on potential risks.
How to legally work with crypto in Ukraine
TL;DR: a company has to obtain a license and enforce KYC/AML procedures for its customers in order to operate cryptocurrencies. Working without a license and other violations are punishable with a fine
To work with virtual assets or keep private keys, a company has to obtain a National Bank’s license. The cost varies from $2,500 to $25,000 depending on the type of services and country of residency. The company has to prove the legality of funds, information on its end beneficiaries, owners of at least 10% of charter capital, and the CEO and founders of the company.
The charter capital for exchange and other operations with crypto is around $22,000 for a resident company and $110,000 for a non-resident company. For storage and management of virtual assets or keys, the required charter capital comprises $48,000 and $220,000 respectively. It seems the latter will cover centralised exchanges and custodial wallets.
It’s not quite clear, however, whether non-custodial wallets, DEX, farms, and NFT marketplaces are subject to licensing. Blockchain apps help users to strike a deal without external assistance, while their owners don’t formally render services in virtual asset operations.
That said, Ukraine’s Ministry for Digital Transformation might release an additional clarification of the law with typical situations explained and questions like “Are DEX subject to licensing” answered.
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