On Tuesday January 8, in an interview with LetKnow, the local news outlet in the field of cryptocurrency (encrypted currency which is also known as electronic money, virtual currency and currency crypto), one of the Ukrainian central bank officials said that according to reports overregulation in Ukraine hinders the development of cryptocurrencies in this country.
Mikhail Vidyakin, director of the strategy and reform department of the National Bank of Ukraine (NBU), believes that many organizations in Ukraine are able to regulate cryptocurrencies. He claims that the number of potential regulators in this area must decrease to develop this industry. The local news outlet LetKnow points that there are at least three state organizations in Ukraine that work to this end:
- National Bank of Ukraine (NBU)
- Ministry of Finance
- National Securities Commission
Vidyakin, also, believes that Ukraine needs a more precise regulatory framework and better definitions in the cryptocurrency industry. This Ukraine central bank official further added that he supports laws and regulations that allow the market to grow, and that banks should prioritize interacting with financial technology sector or fintech (companies and startups use the most up-to-date technologies in providing financial services to customers).
Financial technology which is known as fintech refers to companies or startups that have owned the financial services sector since the 21st century and use the most up-to-date technologies in providing financial services to customers. Moreover, they are characterized by lower costs, fast service, and ease of use. Fintech has recently been used during the current century in the areas of financial literature, micro banking, investment and cryptocurrencies like Bitcoin (a kind of cryptocurrency based on Blockchain). Fintech lowers costs and is considered an alternative to services of the conventional financial institutions.
The blockchain is an encrypted infrastructure on which cryptocurrencies are founded. This technology provides security in cryptocurrencies. Therefore, no one is able to manipulate the history of transactions, and this history is transparently available to users. In fact, Bitcoin was the first cryptocurrency based on Blockchain that was introduced to the market.
According to a report published by Cointelegraph news website in October, last year, the Economic Development and Trade Ministry of Ukraine has already started a state policy to classify and legalize activities related to the area of cryptocurrencies. Yet, this real legal framework has not yet been introduced by the government.
Last September, Ukraine parliament proposed a tax draft on cryptocurrencies which imposes a 5 percent tax on individuals and legal institutions which conduct operations using virtual assets. It is further proposed in this draft that profit tax rate of cryptocurrencies will increase up to 18 percent for businesses starting on January 1, 2024, should increase.
Concurrent with this, a task force in the Ukrainian Ministry of Finance is negotiating taxation guidelines in the cryptocurrency market.