Ukraine could recover $10 billion with appropriate cryptocurrency regulations

Ukraine has lost billions of US dollars in budget revenue as a result of crimes related to cryptocurrency, new reports show.

Proper crypto monitoring will help governments in war-torn countries recover more than $10 billion, according to estimates.

Criminals are using Ukraine’s Crypto Wild East

From corrupt officials to ordinary criminals to even the Russian military, many have used Ukraine’s uncontrolled crypto market for their own benefits and purposes, revealing research conducted by the UK’s leading defense and security think tanks.

Findings from the Royal United Services Institute (RUSI) report focus on using public-private partnerships to address emerging threats in the crypto space, was quoted by the Kyiv Independer online newspaper, arguing in Friday’s article.

“Regulations are needed to help law enforcement identify fraudsters faster, reduce money laundering, and leverage more than $200 million in tax revenue from crypto exchanges.”

Eastern European countries, one of the world’s highest crypto ownership rates, have yet to implement a comprehensive framework for digital currencies.

Ukraine took the first step towards establishing order in the crypto space in early 2022, around the time Russia began its full-scale invasion. The “virtual assets” law passed by the Kiev parliament at the time is not in effect to this day as relevant amendments to the tax law are pending.

Within the Ukraine’s membership process with the European Union, its government is expected to implement dozens of important reforms under its special needs programme, the Ukrainian Facilities Plan. One of these is intended to align the VA Act with EU regulations.

This should be achieved by the last quarter of this year. However, two additional bills that incorporate European market provisions in crypto assets (MICA) regulations into domestic law are still under consideration.

OTC desks and money mules listed among Ukraine’s inherent crypto risks

In addition to global crypto risks, RUSI points to several specific risks to Ukraine, including domestic commercial activities, the use of cryptocurrency to procure approved items from the Russian military, and the practice of money mule.

The restrictions imposed by the National Bank of Ukraine (NBU) prevented capital flights when the war broke out and caused a surge in cryptocurrency use, RUSI said.

“New opportunities have emerged due to illegal financial activities, most notably through money, commonly known as “drops,” in Ukraine,” the independent think tank added.

These are lending bank accounts to criminals and lending bank accounts to wash their money for just $120, explained Kyiv Independer.

Oksana Ihnatenko, managing director of the Ukraine’s Centre for Financial Integrity and one of the co-authors of the RUSI Report, spoke to the English publication.

“Some people don’t even know they’re being used as a ‘money mule’.

Using social media and encrypted apps, Crypto Drops schemes are becoming increasingly organized and decentralized, analysts said. Rusi emphasized:

“Experts estimates suggest that Ukrainian state budgets could be losing about 10 billion (approximately $24 million) per month due to crypto-related drop operations.”

“Russian actors are actively using the OTC platform as part of their hybrid war effort,” the UK Institute claims that social media channels, including Telegram Messenger, are being used to sell synthetic drugs for Ukrainian soldiers for crypto.

RUSI believes that improved surveillance in this sector will allow Ukraine to recover up to $10 billion in its national budget, but failing to properly regulate OTC desks could undermine Ukraine’s overseas position.