Risks to business from virtual asset regulation identified by the UNBA

The current version of the draft law on virtual asset circulation creates an environment that is incompatible with the principles of an innovative economy and the rule of law. In order to prevent the destruction of the crypto sector in Ukraine, it is necessary to systematically review the legislative initiative.

These conclusions were reached by the Committee of the Ukrainian National Bar Association on customs and tax law following a review of draft law No. 10225-d dated 24 April 2025 «On amendments to the Tax Code of Ukraine and certain other legislative acts of Ukraine regarding the regulation of virtual asset transactions in Ukraine», which the Verkhovna Rada adopted as a basis.

The authors of the legislative initiative seek to create a legal framework for regulating virtual asset transactions in Ukraine, ensuring their legal use, taxation, and protection of market participants' rights.

According to experts from the UNBA Committee, the draft is indeed one of the most ambitious attempts to comprehensively regulate the virtual asset market in Ukraine. The initiative provides for a radical transformation of the legal landscape through the creation of a new regulatory architecture, the introduction of an 18% tax rate, and the formation of a state supervision system. The latter raises serious concerns about corruption risks.

The most critical aspect of the draft is the granting of powers to the future regulator and the National Bank of Ukraine that are atypical for a financial supervisory authority.

Thus, Article 114 of the draft law provides for the right to inspect premises, access documents and data carriers on the basis of its own resolution, as well as to question witnesses in a format similar to interrogation.

In the opinion of the UNBA, this creates a dangerous precedent, removing investigative (in essence) actions from the sphere of criminal procedure. Another law enforcement agency is being created under the guise of a financial regulator, which creates risks of pressure on business without adequate legal safeguards.

Another problematic area that advocates have drawn attention to is the unrealistic requirements for market participants and excessive compliance pressure. The draft law obliges even foreign platforms, such as Binance or Coinbase, to register with the State Tax Service of Ukraine and report on the transactions of Ukrainian users. Failure to comply with this obligation is punishable by fines of 100 minimum wages. The implementation of such requirements is virtually impossible, and the practical consequence will be the isolation of Ukrainian users.

In addition, the exchange of virtual assets between citizens is proposed to be allowed only through «authorized institutions». This prohibits direct P2P exchange, which is currently the most common method of transaction, and threatens to push users into a «gray area» where there are increased risks of fraud.

It is also noted that the new requirements for recording transactions, calculating exchange rate differences, and documenting expenses are overly complex for individuals and practically unenforceable. If it is impossible to submit a complete set of documents, the tax authorities will be able to recognize the expenses as zero, turning income tax into a turnover tax.

Among other problematic provisions, the UNBA notes the disproportionate nature of financial sanctions and excessive barriers to market entry. Even taking into account the transitional coefficients, the maximum fine for a legal entity in 2030 could reach UAH 480 million, which means the liquidation of the business for a single violation.

Strict authorization and capital requirements create insurmountable barriers for small and medium-sized businesses, which will contribute to the monopolization of the market by a few large players. Separate attention is drawn to the restrictions for residents of Diia City, who are prohibited from conducting transactions with virtual assets.

In addition, the draft law, following the European MiCA approach, classifies virtual assets into three categories, but does not establish clear criteria for distinguishing them from financial instruments or deposits. This creates legal uncertainty, as the status of an asset and its regulatory regime may be changed by subordinate legislation, which threatens market stability and legal certainty for investors.

The UNBA emphasizes that the draft law needs to be substantially revised before the second reading. First of all, the regulator should not be granted investigative powers, as this contradicts the principles of the rule of law and creates risks of abuse.

The UNBA proposes to focus on regulating the activities of Ukrainian service providers rather than introducing extraterritorial requirements for foreign companies. For individuals, the taxation system should be simplified—for example, by introducing a fixed rate for transactions above a certain annual limit without burdensome accounting procedures.

The legal community also calls for reducing the amount of financial sanctions to a proportionate level, allowing residents of Diia City to work in the field of virtual assets, and providing simplified mechanisms for startups, in particular in the format of a «regulatory sandbox» for testing innovative projects.

These and other comments and proposals have been sent by the UNBA to the Verkhovna Rada Committee on finance, tax and customs policy.