Ukraine has begun formal steps to legalize the crypto industry, shifting from a largely unregulated market to one with a defined legal status.

On Sept. 3, Ukrainian lawmaker Yaroslav Zhelezniak revealed that he and his colleagues approved a bill that legalizes and taxes the use of digital assets in the country.

According to him, the draft bill introduces a tax framework that makes transactions subject to an 18% income levy and a 5% military contribution.

To encourage compliance, the bill offers a one-year window during which withdrawals converted to fiat currency would be taxed at just 5%.

He added that regulators for the space have yet to be named, with both the National Bank of Ukraine and the National Securities and Stock Market Commission being considered.

Meanwhile, he pointed out that new revisions would be made to the bill before the second reading.

Ukraine’s crypto industry

The legislative move comes as Ukraine faces mounting pressure to bring its crypto sector under tighter oversight.

A recent study by the Royal United Services Institute (RUSI) suggested the country could recover up to $10 billion by building a more robust regulatory system.

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According to the report, the country’s thriving over-the-counter markets have become a focal point for illicit financial flows, including purchasing restricted military components, using money-mule networks, and gaps in donor verification rules.

The report linked these weaknesses to broader geopolitical risks, warning that they create opportunities for foreign actors to launder money into politics and undermine democratic systems.

Experts at the institute also cautioned that Russian intelligence may be exploiting Ukraine’s wartime distractions to channel illicit funds through local intermediaries.

Considering this, the report argued that Ukraine risks being perceived as a hub for crypto-based money laundering without stronger oversight, which would damage its financial stability and international partnerships.

The report comes at an exciting time, as Ukraine ranks among the world’s most active crypto users. Data from Chainalysis placed the country in the global top ten for adoption and first in Eastern Europe.

That high level of retail and institutional activity has given lawmakers added urgency, as crypto regulation is now seen as necessary to capture tax revenue and shield the economy from illicit activity.

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Panama has unveiled a sweeping draft bill aimed at regulating cryptocurrencies and fostering the development of blockchain-based services, signaling a renewed effort to position the country as a fintech leader in Latin America.

The proposed law establishes a legal framework for using digital assets in financial transactions, establishes licensing requirements for service providers, and includes strict compliance measures in line with international financial standards.

Legal recognition of digital assets

Under the bill, digital assets are recognized as a legal means of payment, allowing individuals and businesses to freely agree on their use in both commercial and civil contracts.

The legislation explicitly authorizes the use of cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), and stablecoins to purchase goods, pay for services, and settle debts, provided that both parties consent.

The draft also creates a regulatory framework for Virtual Asset Service Providers (VASPs), including wallets, exchanges, and custody platforms. Each would be required to register in a national database managed by the Financial Analysis Unit (UAF) and obtain proper authorization before offering services in Panama.

The bill stipulates mandatory compliance with Know-Your-Customer (KYC) and anti-money laundering (AML) guidelines in accordance with the recommendations of the Financial Action Task Force (FATF).

Additionally, the bill stipulates that any unregistered or non-compliant entities could face administrative sanctions or criminal penalties.

Blockchain for governance and digital identity

Beyond financial regulation, the bill encourages the use of blockchain in public administration. It outlines provisions for digital identity systems and the issuance of tokenized securities, aiming to reduce bureaucratic inefficiencies and promote transparency in both the public and private sectors.

The legislation also authorizes smart contracts, recognizing their legal enforceability under Panamanian law. Lawmakers see this as an opportunity to enable innovative financial products and automate business processes through programmable agreements.

If passed, the bill would mark a significant policy shift after a previous crypto law — passed by the legislature in 2022 — was partially vetoed by then-President Laurentino Cortizo, who raised concerns about regulatory gaps and constitutional inconsistencies.

The new draft addresses these concerns by clearly defining the roles of regulatory authorities, including the UAF and the Superintendency of Banks of Panama.

The draft bill is expected to proceed to committee discussions in the National Assembly in the coming weeks, where it may undergo amendments before being brought to a vote.

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Recent reports revealed that Ukraine’s lawmakers “remain debating” crypto tax rates amid the government’s push to legalize digital assets this year. An expert suggested that the upcoming bill could take longer than expected as the parliament considers lower taxation.

Ukraine’s Crypto Legalization Could Take Until Next Year

In a Thursday interview with local news media, Taras Kozak, a member of Ukraine’s securities regulator advisory group, shared new details on Ukraine’s efforts to legalize cryptocurrencies this year, the potential timeline, and tax rates on digital assets’ income.

The expert disagreed with Danylo Hetmantsev, head of the Verkhovna Rada’s Committee on Finance, Tax, and Customs Policy, who forecasted the bill would be passed in the coming months.

On February 7, the lawmaker said the government was working to ensure the crypto law was adopted by summer 2025. Hetmantsev added that the first draft would be “ready for a first reading in the first quarter” of the year, followed by a second reading in Parliament. However, he noted that the lawmakers are still working on the details related to the crypto taxation measures.

As reported by Bitcoinist, Hetmantsev announced in December that the Parliament’s working group was working alongside the National Bank and the International Monetary Fund (IMF) on a draft bill to be introduced in early 2025, aiming to legalize digital assets in the first half of the year.

Kozak disagreed with the lawmaker’s timeline, stating that crypto’s legalization in Ukraine could take until next year. According to the report, the expert is optimistic that the long-awaited bill will pass all the readings in the Verkhovna Rada and be signed by the end of this year.

Under this timeline, crypto would be legalized, and income from digital assets could be taxed starting in 2026.

Lawmakers Debate Crypto Taxation

The expert affirmed that the final tax rate is key, as Ukrainian investors and businesses using crypto “are not against replenishing the state budget.” According to Kozak, Ukrainians are willing to pay around a 5% tax on their crypto income, but the taxation cannot be delayed anymore.

Ukrainian President Volodymyr Zelensky signed the “On Virtual Assets” law in March 2022, setting the legal framework for regulating the country’s digital asset market. However, the law has not been implemented as it awaits amendments to the Ukrainian Tax Code.

This resulted in the loss of millions in potential tax revenue, as the absence of regulations meant that exchanges had no legal obligations to pay taxes to the Ukrainian authorities for the revenue obtained from crypto assets.

Kozak suggested implementing a small tax, “from 5% to 10%. All citizen income should be taxed because our state lives on this money, our army fights, we buy weapons, and we maintain security,” he stated.

The report affirms the government is considering a standard rate of 18% on personal income plus a 5% military levy. Additionally, investors who can’t prove their initial investments could face up to a 23% tax on their total holdings.

Hetmantsev previously explained that tax exemptions won’t be applied to digital assets as they are taking a “very cautious approach to using cryptocurrencies for tax exemptions” after consulting with the IMF and European experts.

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