The Law "On Virtual Assets" Has Been Signed by the President

On March 15, 2022, Draft Law #3637 "On Virtual Assets" (the "Draft Law") has been signed by the President. The Draft Law recognizes cryptocurrencies as a virtual asset - intangible goods classified in two main categories:

• Secured virtual assets entitle their holder to claim other objects of civil rights. Secured virtual assets are further divided into:
  - those secured by fiat foreign currency (the FX secured, aka stablecoins)
  - those secured by financial instruments (the FI secured)
• Unsecured virtual assets

The Draft Law establishes the legal basis for owning and trading in cryptocurrencies in Ukraine, as well as paves a way for further regulation of financial services related to the circulation of virtual assets. It stipulates, however, that virtual assets shall not be a legal tender in Ukraine for goods, works, and services.

According to the Draft Law, there are four types of activities with virtual assets:
(i) storing, administering virtual assets or virtual asset keys;
(ii) exchange of virtual assets;
(iii) transfer of virtual assets;
(iv) provision of intermediary services related to virtual assets.

Service providers carrying out such activities, including on a cross-border basis, would have to obtain registration and authorization from the local regulators (the National Bank of Ukraine or the National Securities and Stock Market Commission). There will also be statutory minimum capital requirements for service providers. Virtual assets service providers will have to introduce risk management and other good practices, and ensure compliance of client operations with AML requirements.

The Draft Law shall enter into force once the Tax Code of Ukraine is amended to provide for peculiarities of taxation of transactions with virtual assets (the respective Draft Law is currently under consideration by the Parliament).