Ukraine to Oversee Crypto Transactions Above $1,200, Sees Opportunities in Legalization Not Risks

Cryptocurrency transactions in Ukraine will be strictly monitored by the state, although the country’s finance minister admits that it’s not digital coins but fiat cash that criminals and corrupt officials are more likely to use. The legalization of cryptocurrencies remains a priority in Kiev as the government has indicated its clear understanding that the benefits outweigh the risks.

Also read: New Ukrainian Law Says ‘Virtual Assets’ Can Be Used for Payments

Exchanges and Banks to Collect and Keep User Data

Operations conducted by crypto companies and other entities dealing with digital assets will be examined and verified by Ukraine’s financial regulators, Minister Oksana Markarova announced during a recent press conference. All crypto-related transactions worth 30,000 hryvnias or more, the equivalent of approximately $1,200, will be subjected to government oversight, she emphasized while briefing Ukrainian media about the newly adopted anti-money laundering rules.

Cryptocurrency exchanges, other trading platforms and banks will be obliged to collect, store and provide authorities with detailed information about the identity of their customers, both the sender and the receiver, as well as the origin of the transferred digital money. The data will be gathered only once if a user conducts the same type of crypto transactions.

If a certain transaction raises suspicion, the operator of the platform is required to notify the State Financial Monitoring Service (SFMS). The agency has been charged with establishing the origin of the cryptocurrency and according to the finance minister, the watchdog now has at its disposal “the latest analytical tool” capable of determining where the money comes from and even what it has been spent on previously.

“There have been successful cases,” Markarova said, quoted by crypto outlet Forklog. Currently, the SFMS cannot suspend crypto operations completely but it has the authority to freeze cryptocurrency wallets and seize digital assets that have been obtained illegally or which are intended for illicit purposes, if the agency gets hold of a wallet’s private keys in the course of an investigation.

Parliament Finalizing Regulatory Framework for Cryptocurrencies in Ukraine

The powers of the financial monitoring service were expanded with a law transposing the FATF standards and harmonizing Ukraine’s legislation with European AML directives. It was adopted by the Verkhovna Rada in early December but its provisions will enter into force on April 24, 2020. The Financial Monitoring Bill introduces a set of legal terms pertaining to the crypto space, allocates supervisory duties and details that virtual assets can be traded, transferred and used for payments.

The law lists the different types of entities that can provide exchange, storage, sale, and transfer services for digital assets. It also updates the applicable penalties for various violations such as non-compliance with due diligence and customer identification requirements or breach of procedures for the creation and storage of documents. The maximum fine that can be imposed on these companies has been raised from 34,000 to 204,000 hryvnia (over $8,000). An expert group at the Rada’s Digital Transformation Committee is currently working to finalize the framework that will regulate the circulation of cryptocurrencies in Ukraine.

Oksana Markarova acknowledged there’s no comprehensive data about the amount of cryptocurrency Ukrainian citizens currently hold but experts believe the volume is quite high. According to a 2018 survey, 13% of internet-savvy Ukrainians owned digital coins. It was estimated that the daily turnover on the top three cryptocurrency exchanges operating in the country reached $2 million. Two of the platforms, Exmo and Kuna, already have anti-money laundering and know your customer policies in place while the world’s leading exchange Binance recently opened an account with Ibox Bank providing Ukrainians access to global markets.

Ukraine’s finance minister, representing the country’s young administration that came to power after the election of President Volodymyr Zelensky, thinks the legalization of crypto operations can bring positives to the Ukrainian economy which outweigh the risks of using cryptocurrencies for money laundering. “I think that our criminals and corrupt officials are quite conservative and still keep funds mostly in cash. Therefore, in the legalization of cryptocurrencies, I see opportunities for the development of this industry in our country, and not a threat,” Markarova stated in an interview with the online magazine MC Today.

Cryptocurrency exchanges and digital coin issuers were recently listed among the “key players of the financial ecosystem” in Ukraine’s new Financial Sector Development Strategy 2025. The document, prepared by the country’s financial regulators, including the National Bank and the Finance Ministry, also mentions blockchain development as one of five “strategic goals” of innovation growth.

Do you think Ukraine will attract more crypto businesses by providing greater regulatory clarity for the industry? Share your expectations in the comments section below.

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