Explained: What is Ukraine’s new cryptocurrency law and what does it mean for the war-torn country?

Representational image. AFP

Ukrainian president Volodymyr Zelenskyy has passed a law that makes cryptocurrency legal in the country.

The law comes at a time when the country has been receiving digital asset donations to support its defence against the Russian invasion. According to Coindesk, Ukraine has so far received at least $100 million in crypto donations over the past three weeks since Russia began its military operation in the country.

Days since the Russian invasion, Ukraine has been accepting donations in cryptocurrencies, including dogecoin, solana, bitcoin, ether, and a stablecoin called tether. Stablecoins are digital currencies tied to real-world assets such as fiat currency

According to Ukraine’s Ministry of Digital Transformation, the law will allow foreign and Ukrainian cryptocurrencies exchanges to operate legally in the country.

What is the new cryptocurrency law and what does it mean for Ukraine as it faces military onslaught from Russia, let’s take a look:

What is the new cryptocurrency law?

As per a statement issued by the Ministry of Digital Transformation, the law determines the legal status, classification, ownership and regulators of virtual assets, as well as setting registration requirements for crypto services providers.

The digital ministry said in a tweet that banks will now be able to open accounts for crypto companies.

Ukraine’s cryptocurrency market will be regularised by its National Securities and Stock Market Commission.

Under the new law, the regulator will also have power to determine policies on digital assets, issuing licenses to businesses that deal with cryptocurrencies and act as a watchdog.

How does legalising cryptocurrency help Ukraine?

In its defence against the advancing Russian forces, Ukraine is continuously in need of capital. The country’s lawmakers have been discussing legalising cryptocurrency since at least September last year.

However, it was vetoed by Zelenskyy saying the country couldn’t afford a new regulatory body.

According to a report by TechCrunch, thanks to the new law, Ukraine’s first crypto exchange, Kuna, will be able to convert crypto into fiat, which is government-issued currency that is not backed by commodities like gold. Most modern day currencies, like the US dollar, are fiat currencies.

Without the law, Kuna was limited to use crypto only with crypto-friendly suppliers.

As per the report, the country has also partnered with the Bahamas-based exchange FTX to convert crypto contributions to Ukraine’s war effort into fiat for deposit at the National Bank of Ukraine.

According to a cnbc report, an official Ukraine government account tweeted that an “airdrop” is confirmed for Thursday. The word airdrop is used when an individual or entity gives away cryptocurrency for free.

However, no other details were shared about what digital currency it would be and to whom.

The report said that there have been speculations that Russia could use cryptocurrencies to bypass the economic sanctions laid on it.

To refrain Russia from doing that, Ukraine’s minister of digital transformation Mykhailo Fedorov called on major cryptocurrency exchanges to block the accounts of Russian users.

With inputs from agencies

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