While many parts of Ukraine are still facing threats from Russia’s military, some residents, industry leaders and government officials are turning to digital assets for help in relocating people, funding humanitarian aid projects and getting supplies to its own soldiers.
On Feb. 17, exactly one week before Russian forces began their attack on Ukraine, the country’s legislature adopted the “On Virtual Assets” bill. Ukrainian President Volodymyr Zelenskyy later signed the bill into law, establishing a legal framework for Ukraine to operate a regulated crypto market.
Ganna Voievodina, chief legal officer of Ukraine-based crypto exchange Kuna and one of the bill's authors, told Cointelegraph that the ramifications of the legislation came at a critical time when the country needed legal access to crypto.
“A lot of Ukrainian government [officials] have a lot of funds in their accounts, but according to the laws, they couldn’t invest in cryptocurrency,” said Voievodina. “Now they can exchange, they will have opportunity to take their funds to buy crypto, to invest and to buy some trades and some goods for the Ukrainian army, for Ukrainian people, because we understand that cryptocurrency is much easier to be invested in any legal goods.”
Since Russia’s invasion of Ukraine, crypto users from around the world have sent around $70 million in digital asset donations to government wallet addresses through a recently launched website. Michael Chobanian, founder of Kuna and president of the Blockchain Association of Ukraine, told U.S. lawmakers on March 17 that it only took “about 10 minutes” to set up crypto donations for the government, while arranging fiat transfers through the National Bank of Ukraine took roughly 10 days.
“The cryptocurrency community made a lot of donations to the government and people to support them in such bad times that we have faced, and never could imagine that we could face,” said Voievodina. “A lot of digital currency exchanges from all over the world, including Binance, including Kuna, including even Coinbase, [...] they helped our country with donations.”
According to Voievodina, the Ukrainian law could seemingly be broken down into two laws applied to companies handling crypto and taxes around digital assets. She said the law would be akin to rules from the Financial Action Task Force, applied to virtual asset service providers, including digital wallet providers, exchanges, financial intermediaries and crypto transfer services in Ukraine. Firms providing crypto-related services have to register with the government and be in compliance with Anti-Money Laundering regulations.
In Ukraine, the National Securities and Stock Market Commission and the country’s central bank act as regulators for financial products, including digital assets. According to Voievodina, regulators coordinated with lawmakers to ensure that the digital asset tax law will be adopted before establishing the regulatory framework. She said a draft of the tax law suggested crypto traders be subject to lower taxes for five years following the adoption of the legislation — 5% of annual profit compared with 18% for many other cases. However, the law is subject to review by Ukraine’s parliament.
“It was very symbolic that [the law] was adopted right before the war,” added Voievodina.
Though Zelenskyy might have signed the bill into law quickly, even in the absence of the invasion of the Russian military, according to Voievodina, it was “just in time” to simplify the legal framework and allow people to supply goods for the army using digital assets. She said Chobanian was “responsible for all the funds” being donated to the government in crypto, which he uses to buy food, supplies or fiat in accordance with requests from the Ministry of Digital Transformation.
Let us update you on the crypto donations. Our Crypto Fund has reached $60 mln. Every donation matters. Every crypto matters! Thank you, crypto people! https://t.co/4X6d8EwXTD— Міністерство цифрової трансформації України (@mintsyfra) March 20, 2022
“The war didn’t change anything, just people with crypto became more visible because this business has more profit and opportunity to help the country,” said Voievodina. “These people are not enemies of financial systems — they are friends of Ukraine, and they can help it. Principally, the war didn’t change the cryptocurrency world; the cryptocurrency world will help in this war.”