The legal status of cryptocurrency in Ukraine: current situation and prospects

Cryptocurrency has long since ceased to be viewed as merely a technological experiment and has moved beyond the narrow circle of IT enthusiasts. Currently, the scope of cryptocurrency applications encompasses investment, value preservation, international money transfers and donations. For Ukraine, this trend is particularly relevant: despite martial law, economic instability and currency restrictions, Ukrainian users remain among the most active participants in the global cryptocurrency market.

However, the growth in cryptocurrency use is significantly outpacing the pace of proper legal regulation and the adaptation of the regulatory framework. The Ukrainian cryptocurrency market already exists, but the legal mechanisms for its specific regulation have not yet been fully implemented. Despite the adoption of the Law of Ukraine ‘On Virtual Assets’ in 2022, it has not yet entered into force due to the absence of the necessary amendments to tax legislation. Under these circumstances, market participants are forced to rely on the general provisions of civil, tax and financial legislation, as well as to follow isolated clarifications from the regulatory authorities.

This situation creates a legal conflict typical of a transitional period: the virtual assets market in Ukraine is operating at full capacity — cryptocurrencies are declared, traded and used in business – yet the question of its precise status within the Ukrainian legal system remains unresolved. Is cryptocurrency property? Can it be a means of payment? How should income from its sale be taxed? Do businesses have the right to officially accept payment in digital currency? How can an owner protect their rights to crypto-assets in court, and what evidence should they provide? The answers to these questions are not yet always clear-cut.

Therefore, the question of the legal status of cryptocurrency in Ukraine today is not purely theoretical, as everything depends on the official definition of virtual assets: taxation rules, the legality of business transactions, the procedure for tax returns, and the protection of investors in court. Ultimately, it is this decision that will determine whether Ukraine can become a fully-fledged player in the European crypto market.

The main challenge for policymakers is the lack of a unified terminological approach. In everyday language, terms such as ‘cryptocurrency’, ‘crypto-asset’ and ‘virtual asset’ are often used interchangeably. However, from a legal perspective, there is a significant difference between them.

‘Cryptocurrency’ is usually understood to mean Bitcoin, Ethereum, stablecoins and other digital assets whose circulation is facilitated by blockchain technology. At the same time, Ukrainian legislation does not contain a separate, universal definition of cryptocurrency; therefore, the state uses the broader concept of ‘virtual asset’. The Law of Ukraine ‘On Virtual Assets’, which has not yet come into force, defines it as an intangible asset that is the subject of civil rights, has value and is expressed as a set of data in electronic form.

An important step was the enshrinement of the concept of a ‘digital object’ in the Civil Code of Ukraine. This term refers to an asset that is created and exists exclusively in a digital environment and has property value. Virtual assets are also classified as such items. This means that civil legislation has already laid the groundwork for recognising crypto-assets as objects of property rights; however, their legal regime still requires further refinement.

At the same time, cryptocurrency should not be confused with electronic or digital money. Electronic money is issued by banks and constitutes their financial obligations. Digital money is the electronic equivalent of the standard hryvnia. Cryptocurrency, on the other hand, is usually decentralised, is not pegged to the hryvnia and is not an official means of payment. It is essential to draw a clear distinction between these concepts, as taxation rules, accounting practices and the lawful use of assets in business depend on this distinction.

Read the full article on the ‘Yurydychna Gazeta’ website here.