Stablecoin issuer / redeemer in Ukraine

Law of Ukraine "On Virtual Assets" (№ 2724-IX): Adopted by the Verkhovna Rada (Parliament) on 6 September 2022 and signed into law by the President on 15 March 2023. This is the foundational law.

Note: While the law is enacted, its full operation depends on amendments to tax legislation and the adoption of various sub-regulatory acts by the NBU and NSSMC.

Law of Ukraine "On Payment Services" (№ 1591-IX): Adopted on 30 June 2021. This law defines electronic money and payment services. The Law "On Virtual Assets" explicitly distinguishes virtual assets from electronic money under this law.

National Bank of Ukraine (NBU): Responsible for regulating virtual assets that are secured by currency values (e.g., fiat-pegged stablecoins) and for supervising virtual asset service providers (VASPs) that provide services with such assets. It also oversees payment services and electronic money.

Virtual Assets vs. Electronic Money/Securities: The Law "On Virtual Assets" categorizes virtual assets as intangible goods, explicitly stating that virtual assets are not legal tender, electronic money, or securities.

"Secured Virtual Assets" (Забезпечені віртуальні активи): This is the category most relevant to stablecoins. A "secured virtual asset" is defined as a virtual asset that is secured by a certain object (money, other virtual assets, certain property rights, etc.).

Stablecoins pegged to fiat currency (e.g., USD, EUR, UAH) would primarily fall under "secured virtual assets" whose underlying asset is a currency value. These types of stablecoins and related services are under the NBU's jurisdiction.

Full Backing: For "secured virtual assets" (which includes stablecoins), the Law "On Virtual Assets" generally mandates full and appropriate backing of the virtual asset by the underlying asset (e.g., fiat currency, other virtual assets, or property rights).

Specifics: The NBU (for fiat-pegged stablecoins) and the NSSMC (for other secured virtual assets) are expected to establish detailed requirements regarding the nature, location, and segregation of reserves, as well as audit requirements, through their sub-regulatory acts. These specifics are critical and are still awaited.

The Law "On Virtual Assets" introduces a licensing regime for Virtual Asset Service Providers (VASPs). This includes entities that issue virtual assets (including stablecoins), facilitate their exchange, transfer, storage, or provide other related services.

NBU: Licenses VASPs dealing with secured virtual assets whose underlying asset is currency value (i.e., fiat-pegged stablecoins) and those offering services with such assets.

Issuer Obligation: Issuers of secured virtual assets are expected to ensure the possibility of redemption, though the precise mechanisms and timelines for this will be detailed in the NBU's or NSSMC's specific regulations.

Lack of Direct Backing: Algorithmic stablecoins, by definition, do not typically maintain a 1:1 reserve in fiat currency or other tangible assets. This lack of direct "backing by a certain object" may mean they do not qualify as "secured virtual assets" under the Ukrainian law.

As of late 2023/early 2024, this secondary legislation has not yet been fully adopted, meaning the actual process for obtaining a license is largely suspended or not fully operational. The focus of the government has been on wartime priorities.

Participation in and provision of financial services related to the issuance/sale of virtual assets.

Exchanges (Trading Platforms): Will require a VASP license covering "exchange services."

Currently, the exact, officially finalized capital requirements are pending the adoption of secondary legislation.

This is a cornerstone of the VA Law and is largely aligned with international standards (FATF recommendations).

Definition of VASP: Article 1 of the Law defines a "Virtual Asset Service Provider" (VASP) as a legal entity that, as part of its business activities, performs one or more of the following services for or on behalf of another natural or legal person:

Safekeeping and/or administration of virtual assets or instruments enabling control over virtual assets. (This directly covers custody).

Separate Accounting: Article 12, Part 2, Point 2 requires VASPs to maintain separate accounting records for their own virtual assets and those of their clients. This is a foundational step towards ensuring client assets are not commingled with the VASP's proprietary assets.

Issuing Authority: The NSSMC is generally responsible for issuing these permits. For virtual assets secured by monetary values, the NBU would be the responsible authority.

AML/CFT Compliance: Obtaining a permit is intrinsically linked to strict adherence to the AML/CFT Law, including KYC procedures, transaction monitoring, and reporting suspicious activities.

Law of Ukraine No. 361-IX "On Preventing and Counteracting Legalization (Laundering) of Criminal Proceeds, Terrorist Financing and Financing the Proliferation of Weapons of Mass Destruction" (dated December 6, 2019, with subsequent amendments).

Identification and Verification:

Beneficial Owner (UBO) Identification: Identify and take reasonable measures to verify the identity of the beneficial owner(s) of the customer. This is crucial for both individuals (e.g., if acting on behalf of another) and legal entities.

Conduct ongoing monitoring of the business relationship and transactions undertaken throughout the course of that relationship to ensure consistency with the VASP's knowledge of the customer, their business, and risk profile. This includes monitoring the source of funds and the destination of virtual assets.

Enhanced Due Diligence (EDD):

Transactions above specific thresholds (e.g., equivalent of UAH 400,000 for certain types of operations, though suspicion requires reporting even below this).

Simplified Due Diligence (SDD):

Current Interpretation: Profits derived from virtual asset transactions (e.g., selling cryptocurrency for fiat currency, exchanging one cryptocurrency for another at a profit, receiving crypto as payment for services) are generally treated as other investment income or simply other taxable income.

Personal Income Tax (PIT): 18%

Military Levy: 1.5%

Tax Rate: Corporate Income Tax (CIT): 18% on the taxable profit.

Services related to virtual assets (e.g., exchange fees charged by a virtual asset service provider, custodial services, brokerage services) might be subject to VAT (20%) if they qualify as taxable services performed in Ukraine.