- The Ukrainian government passed a bill to legalize cryptocurrencies on Thursday.
- But digital currencies are not legal tender yet.
- Volunteer groups have been receiving donations in cryptocurrencies in Ukraine lately.
The Ukrainian government has passed a bill into law legalizing cryptocurrency but not as a legal tender. While the decision received broad support from the crypto community, its timing has drawn attention. It is believed the government wants to keep all economic channels open amid the border tensions with Russia.
According to Western officials, Ukraine is on the verge of a war with Russia, with both sides amassing troops on their borders. Top US officials warned of an imminent conflict.
Bitcoin, the world’s largest cryptocurrency by market capitalization, plummeted below US$41,000, dragging down the overall market by over 5.3% on Friday morning.
On Thursday, Ukrainian digital transformation minister Mykhaylo Fedorov had announced the passing of the cryptocurrency bill. The crypto exchanges and companies can now operate legally in the country. And users will have secure access to virtual assets.
Meanwhile, the government is altering the tax and civil codes for the digital assets market.
The Ukrainian parliament tried to pass a similar bill in September 2021 but was vetoed by President Volodymyr Zelensky, citing the country can’t afford a new regulatory body to manage crypto.
Why Did Ukraine Legalize Cryptocurrency Amid War Fears?
This time, however, the president gave his consent. Ukraine’s National Securities Commission is made the regulatory authority for the cryptocurrency market.
Its primary function will be issuing permits to crypto service providers, monitoring, and supervising.
Ukraine has not made cryptocurrency legal tender
Although cryptocurrencies are legal in Ukraine, they are not legal tender. It means people can trade and invest in cryptocurrency but cannot use them as a legal fiat currency.
The law also details guidelines to be followed by the crypto companies, with provisions for fines and other penalties in case of rule violation.
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Ukraine’s crypto market
According to Chaianlysis, Ukraine ranked fourth in the 2021 Global Crypto Adoption Index, a measure of volume and value of crypto traded in a country.
After Russia banned crypto mining, Ukraine has opened its door to the cryptocurrency industry.
It hopes to attract more foreign investment into its crypto market after legalization.
Ukraine’s volunteer groups have been receiving donations in cryptocurrencies lately. According to Reuters, some of them are involved in supplying equipment to government forces.
A report of blockchain researcher Elliptic said the volunteer groups had received over US$550,000 worth of cryptocurrency last year. In 2020, it was around US$6,000. According to Elliptic, in 2021, Kyiv-based group Come Back Alive received crypto worth around US$200,000. The group provides material and medical supplies to the Ukrainian army.
Cryptocurrencies can be sent and received anonymously. It does not require the traditional fund-transfer system to send or receive crypto donations.
With the legalization of cryptocurrencies, Ukraine may see more donations pouring into the country, at least as long as the border tensions remain.