Bitcoin is now creating a buzz in Ukraine’s online sector. According to the 2017 report from Zeitgeist, the keywords “Bitcoin” and “Mining” now belong to the top 5 in Google search. Search queries such as “Why do we live?” and “Why did gas go up” also belong to the most popular searches, which is an indicator of the economic turmoils in the country. And with Ukrainian legislation still on the table to discuss the future of Bitcoin in the country, “I need a fidget spinner” also appeared in most queries, which is a sign that more Ukrainians are stressed.
Bitcoin brings hope to Ukraine’s depreciating currency
As Ukraine starts to lean towards the West, the country is still struggling both economically and socially. Ukraine has experienced detrimental inflation since the economic downturn started in 2013. Based on the reports from Ukraine Statistics Service, consumer prices have raised by 13.6 percent each year, which has even reached 18 percent for food products. The country’s Gross Domestic Product (GDP) has been negative for nearly eight years.
Similar to other countries who are struggling with a depreciating national currency, Ukraine found a fresh alternative in cryptocurrencies. And in spite of organizational reluctance, there are several initiatives to proceed with the legislation to regulate cryptocurrencies in the country. Government officials hope to entice significant foreign crypto investments in order to increase growth, back up support for the Hryvnia, and improve the business sector.
Bitcoin regulation is still on debate
With the growing interest towards cryptocurrencies in Ukraine, the government is yet to provide enough response to the growing challenges. At present, Bitcoin is neither legal nor illegal in the country. The legality of Bitcoin is still under discussion, which is being stalled because of the absence of a unified organizational approach. Meanwhile, Ukraine’s National Bank issued extensive warnings about the high-risk nature of cryptocurrencies, similar to what other central banks in Europe are doing. Central bank representatives clarified that the bank is following other central banks on the classification of Bitcoin as non-currency.
Local media in Ukraine are wondering whether the government will follow the act of the United States in embracing Bitcoin as a commodity and finally approving the cryptocurrency in the futures market. As of press time, Kiev considers cryptocurrencies as non-currency and non-security. It is not yet clear if the state will consider it as a commodity but there were talks about Bitcoin being classified as financial assets.
However, only two months ago, Ukraine became the first nation in the post-Soviet sphere to pass a bill to regulate Bitcoin. Ukraine’s legislative branch is now reading at least three bills since October.
Ukraine’s Congress is now discussing bills on Bitcoin regulation
On October 6, Verkhovna Rada (Ukraine’s Legislative Branch) received a bill proposing a law to regulate the circulation of cryptocurrencies in the country. The primary purpose of the bill is to legalize Bitcoin but includes an explicit disclaimer about the executive branch and central bank clarifying that they will not have any responsibility for the risks associated with Bitcoin.
However, cryptocurrency exchanges have to implement KYC process and keep intensive records for all transactions. The bill also proposes amendments to Ukraine’s Tax Code, which covers another crucial aspect of legalizing Bitcoin. This will include several clauses that will define income from cryptocurrency mining and transactions.
Another bill was submitted to Rada on 10th October. This bill aims to expand the legal definitions to include derivatives from cryptocurrencies. The draft legislation, which was written in collaboration with Bitcoin experts, recognize cryptocurrencies as property. This will add a legal status for cryptocurrencies so it can be used for exchanging products and services. By the end of October, an addendum to the draft legislation was also submitted to revise the Ukrainian Tax Code.
Bitcoin legislations are expected to be passed in mid-2018
All three proposed legislation have surpassed significant hindrances to advance through legislative commissions, which include dealings with customs procedures, economic policies, banking regulations, etc. Meanwhile, the European Integration Commission has also reviewed the proposed legislation, and are also integrated into a report exploring the possible effects of new laws on Ukraine’s national budget. However, the legal procedures may take at least six months to be completed, as the National Bank and the Executive Ministers have to produce their own statutory opinion in enacting new legislation. As it undergoes legal processes, Russia could surpass the position of Ukraine as the first post-Soviet country to legalize Bitcoin.
Nonetheless, Ukraine is noted as the first country to attract local and overseas cryptocurrency investors with rewards, which include tax breaks and lower power rates. It will be easier for corporate organizations and private individuals to operate mining and trade cryptocurrencies. The whole spectrum of the rewards could be revealed once the primary legislation becomes actual laws. But for now, foreign investors can now register a limited liability company in Ukraine for as low as $100, and if you invest at least $100,000 you can be issued with a Ukrainian passport.