Ukraine is taking significant steps towards regulating the cryptocurrency market, with the country’s financial regulator proposing a tax framework that could impose up to a 23% tax on certain crypto income. This initiative reflects a growing recognition of cryptocurrency as a legitimate financial and economic entity.
The National Securities and Stock Market Commission (NSSMC) announced on April 8 that the proposed tax structure would classify select crypto transactions as personal income, specifically targeting cash-outs into fiat or exchanges for goods and services. Notably, transactions involving crypto-to-crypto conversions and stablecoins would be exempt under this proposal, aligning Ukraine’s approach with that of other European nations such as Austria and France as well as more crypto-friendly jurisdictions like Singapore.
NSSMC Chairman Ruslan Magomedov emphasized the urgency of addressing crypto taxation, stating, “The issue of crypto taxes is not a hypothesis, but a reality that is fast approaching.” This framework aims to support lawmakers in making informed decisions about the impact of each suggested taxation method on the market and the respective tax liabilities.
Under the proposed framework, standard crypto transactions would be subject to an 18% tax with an additional 5% military levy. The rationale for exempting stablecoins is rooted in the existing Ukrainian tax code, which already excludes income from various foreign exchange transactions.
Taxation Guidelines for Crypto Activities
In addition to the tax structure, the NSSMC has provided guidance on other crypto-related activities, including mining, staking, and airdrops. The commission recognizes mining as a business activity, with a possibility of a tax-free limit on specific transactions. In contrast, staking could be classified as “business captive income” and only incur taxes when the crypto is cashed out for fiat.
The treatment of hard forks and airdrops is still under consideration, with options for their taxation being either as ordinary income or at the point of cash-out. The NSSMC has expressed that a tax-free threshold may alleviate burdens on small investors, a common practice in various jurisdictions.
Exemptions are also being considered for donations, family transfers, and long-term holders. However, it is suggested that this exemption may not extend to non-custodial wallets. Ukrainian parliament members are currently reviewing a draft bill intended to legalize cryptocurrencies, with plans for finalization expected soon.
Ukrainian President Volodymyr Zelenskyy established a legal framework for a regulated crypto market in March 2022, marking a pivotal step in the nation’s approach to cryptocurrencies. As the regulatory landscape evolves, the proposed measures signify Ukraine’s commitment to integrating cryptocurrency into its economic structure while attempting to balance taxation with market growth.
