Ukraine’s yearlong marathon to legalize cryptocurrencies has gone on a detour. Instead of signing the country’s first bill regulating digital assets into law, President Volodymyr Zelensky returned it to parliament for changes.
According to an announcement on the president’s website, Zelensky wants the bill changed so that the National Commission on Securities and Stock Market, Ukraine’s equivalent to the U.S. Securities and Exchange Commission, becomes the main crypto regulator. The current version has the Ministry of Digital Transformation regulating cryptocurrencies, the National Commission on Securities and Stock Market regulating digital assets backed by securities and the National Bank of Ukraine in charge of central bank digital currency (CBDC) issuance.
The version proposed by the president leaves CBDC supervision to the National Bank, but everything else goes to the securities regulator, including the licensing of the crypto brokers and other services.
“In particular, the public reports of the International Organization of Securities Commissions (IOSCO) state that certain types of virtual assets contain, in their economic essence, features characteristic of financial instruments. Regulation of issuance of such types of virtual assets should be carried out by financial market regulators, as this function is specific to them,” said the president’s message to parliament, which was published on the legislature’s website.
Parliament will now have to give the bill another hearing and suggest a new version.
The bill, first introduced to the parliament last summer, was created with input from the local crypto community. The document passed a second hearing in September and was sent to Zelensky for signing into law.
Ukraine is home to multiple well-known blockchain developers and startups, however, the country is struggling with its status as a risky jurisdiction on the global market. The bill, sponsored by Ukraine’s Ministry of Digital Transformation, is aimed at developing the digital assets market and attracting crypto businesses to the country.
Cutting Out Russia
The law defines digital assets as non-material goods that have a value and are represented by “a set of data in electronic form.” Digital assets are divided in two groups: those that are backed by other assets and those are not. Digital assets can not be used to pay directly for goods and services in Ukraine.
Digital assets also include the CBDC, which the central bank can issue, according to the recently adopted On Payment Services law.
The new bill defines legal ownership of a digital asset as control over its keys, unless they were stolen or held by a custodian, either due to an agreement with the owner or a court decision. The document also details basic rules of operation for businesses working with digital assets in Ukraine.
As the bill moved through the legislative process in parliament, Verkhovna Rada, the initial text was updated to say that no crypto company having beneficiaries or executives in the “aggressor state,” can do business in Ukraine.
By the “aggressor state” the authors mean Russia, the Ministry of Digital Transformation confirmed to CoinDesk. The country’s neighbor to the east made its presence felt seven years ago, annexing the Crimea peninsula and fueling simmering civil unrest in the eastern part of Ukraine with weaponry and unidentified troops.