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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A contentious $7 million bet on prediction platform Polymarket has sparked disagreement between the Polymarket and UMA communities.

The bet, which speculated on whether Ukraine would agree to a mineral deal with U.S. President Donald Trump before April, saw its “yes” probability surge from 9% to 100% between March 24 and 25, despite no official agreement being reached.

Polymarket relies on UMA, an optimistic oracle system, to determine the outcomes of its prediction markets.

In this system, anyone can propose a resolution by staking a $750 USDC.e bond, which can then be challenged. If a dispute arises, UMA token holders vote to settle the matter.

In this case, the bet resolved as “yes,” leading many users to suspect manipulation by a “UMA whale” — a holder of a large number of UMA tokens capable of influencing the vote.

Polymarket responded via its Discord server, admitting the resolution was unexpected but denying it constituted a “market failure” that would warrant refunds.

It clarified that the market was resolved too soon, as no deal between Ukraine and the U.S. has been confirmed, yet it stood by the UMA voting process to correct the outcome.

Polymarket has since turned to its community for suggestions on preventing future issues, promising clearer rules and forthcoming updates, though it has yet to detail specific changes.

Read more: Polymarket Suffers UMA Governance Attack After Rogue Actor Becomes Top-5 Token Staker

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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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Ukraine is advancing efforts to legalize crypto, with lawmakers expected to vote on a long-awaited bill in the coming months, local media reported on Feb. 28.

However, uncertainty remains over how digital assets will be taxed, a key issue that could impact the country’s growing crypto sector. Ukraine is exploring a crypto tax rate between 5% and 10% as part of its broader efforts to regulate the digital asset market while generating revenue for the state budget and military funding.

However, officials are also considering applying the standard taxation framework, which would impose an 18% income tax plus a 5% military levy, bringing the total tax burden on crypto earnings to 23%.

The final decision remains under discussion as lawmakers work toward passing a comprehensive regulatory framework, with legislation expected to be finalized by mid-2025.

Danil Hetmantsev, head of the Verkhovna Rada’s finance, tax, and customs committee, said he expects the legislation’s first reading by the end of March and a second reading soon after. If the bill moves forward as planned, it could be enacted by mid-2025. However, some officials remain skeptical about the timeline.

Balancing regulation and growth

Taras Kozak, a member of the Kyiv City Council and president of the investment group “UNIVER,” suggested the process may take longer.

Kozak said in an interview:

“I’m optimistic that the bill will pass by the end of the year, but full legalization and taxation will likely come into effect in 2026.” 

Ukraine has emerged as a leader in crypto adoption, with digital assets playing a vital role in financial transactions and donations since Russia’s invasion in 2022. The country has embraced blockchain technology to support its economy, but legal uncertainties have hindered mainstream integration.

The pending legislation aims to establish clear guidelines for the use and taxation of cryptocurrencies. While the exact tax structure has yet to be finalized, officials have hinted at a possible flat-rate tax or a tiered system based on trading volume.

Kozak said that “Ukraine needs a competitive regulatory framework” and warned that overly complex taxation could push businesses and investors toward offshore platforms.

Legislative delays

Despite strong political support, the process has faced delays. In 2021, Ukraine passed a law recognizing cryptocurrencies, but it required additional amendments to align with EU standards.

The current bill seeks to address those gaps, ensuring compliance with global anti-money laundering (AML) and counter-terrorism financing regulations.

Hetmantsev emphasized the urgency of passing the legislation, arguing that delays could hinder Ukraine’s ability to attract foreign investment in blockchain-based industries.

He said:

“We are doing everything possible to expedite the process.”

If the law is enacted, Ukraine will join a growing list of countries formally integrating digital assets into their financial and tax systems.

However, industry leaders stress that taxation policies will play a crucial role in determining whether the market flourishes or struggles under regulatory pressure.

The European Union has taken action against Garantex, a Russia-based crypto exchange, as part of its 16th sanctions package targeting entities linked to the Ukraine conflict.

In a statement released on Feb. 24, the EU identified Garantex as a key player in facilitating Russia’s efforts to bypass financial restrictions.

The council cited the exchange’s close association with Russian banks already under EU sanctions as a primary reason for the measure. This move marks the first time the EU has directly sanctioned a Russian crypto exchange.

The EU’s latest sanctions seek to limit Russia’s access to financial resources and disrupt its ability to fund military operations. By targeting Garantex, the EU aims to close financial loopholes that enable Russia to circumvent economic restrictions through crypto.

Notably, CryptoSlate previously reported that Russians had turned to digital assets like Bitcoin and Tether’s USDT to neutralize the impact of Western sanctions on its economy.

Meanwhile, the package includes restrictions on 48 individuals and 35 entities, increasing the total number of sanctioned persons and organizations to over 2,400.

The EU stated that these sanctioned entities actively support Russia’s war efforts. As a result, their assets are now frozen, and EU citizens and businesses are prohibited from conducting transactions with them. Additionally, individuals on the list face travel bans, restricting their movement within EU member states.

Beyond Garantex, the sanctions apply to Russian oil transport companies, a Chinese satellite imaging firm, media propagandists, business figures, and political entities. These measures aim to tighten economic and financial pressure on Russia’s war-linked networks.

This action against Garantex follows prior restrictions imposed by the United States and the United Kingdom. In 2024, investigators in both countries were examining the exchange’s role in processing approximately $20 billion USDT.

Before that, the US Treasury accused Garantex of failing to comply with anti-money laundering (AML) and counter-terrorism financing (CFT) regulations, which allowed illicit transactions to occur on its platform.

As a result. the exchange’s wallets are now listed on the US Office of Foreign Assets Control’s (OFAC) Specially Designated Nationals (SDN) List.

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