Law “On Virtual Assets” with the Proposals of the President of Ukraine Adopted

On February 17, the Verkhovna Rada passed the Law on Virtual Assets (Bill No. 3637), which includes proposals from the President of Ukraine, who vetoed the law in October last year. According to the results of the voting, the people’s deputies supported all the proposals.

The Law will launch a legal market for Ukraine’s virtual assets, which will be regulated by the National Securities and Stock Market Commission (this amendment to appoint the already existing body was made by the President: market regulation requires significant budget revenues, so the creation of a new regulatory body would be costly).

By legislators’ definition, a virtual asset is a special type of property that is valuable in electronic form, exists in the system of circulation of virtual assets, and may be in civil circulation. Virtual assets can be secured or unsecured. Secured virtual asset is the right of the owner of the virtual asset to the objects of civil rights, including the right to estate, property rights, claim rights, service rights, property rights to intellectual property.

According to the Deputy Prime Minister – Minister of Digital Transformation Mykhailo Fedorov, the new Law will provide additional opportunities for business development in Ukraine. Crypto companies will get a legal environment to operate, and Ukrainians will gain secure access to the global virtual asset market. In addition, cryptocurrency is a new class of assets which will be convenient to invest into.

Regulators of Virtual Assets in Ukraine

Thus, state regulation in the field of virtual assets turnover is entrusted to the National Commission on Securities and Stock Market. Tasks of the National Commission provided by the Law are:

– formation and implementation of policy in the field of virtual assets;

– determining the order of circulation of virtual assets;

– concluding international agreements and exchanging experience with relevant bodies of foreign states on cooperation in regulating the circulation of virtual assets;

– issuing permits to virtual asset service providers;

– entering information into the State Register of Service Providers related to the turnover of virtual assets;

– carry out supervision and financial monitoring in the field of virtual assets.

Virtual assets secured by currency values ??will be regulated by the National Bank of Ukraine. Its competence includes the following powers:

– state regulation of the turnover of virtual assets secured by currency values;

– determination of the list of currency values ??(except for the national currency (hryvnia)), for which the exchange of virtual assets can be carried out, and the procedure for such exchange;

– determining the list of currency values ??that may be collateral for such assets;

– harmonization for providers of services related to the turnover of virtual assets of the rules for the exchange of secured virtual assets and rules for the exchange of currency values ??(except national currency) for virtual assets;

– setting restrictions on the exchange of virtual assets for currency values.

The new provision of the Law stipulates that in cases and procedures established by the National Securities and Stock Market Commission, professional participants in capital markets have the right to carry out the relevant activity of a provider of services related to the circulation of virtual assets without obtaining permits (the previous version required obtaining a permit to carry out the relevant activity).

Regulation of the Virtual Asset Market in Europe

In 2020-2021, the Expert Group of the EU Commission on Banking, Payments and Insurance collected feedback, advice and opinion in the framework of the initiative “EU Regulatory Framework for Crypto-assets”.

One of the steps was the publication on September 24, 2020 by the Commission of a proposal for the regulation of cryptocurrencies (“Markets in Crypto-Assets Regulation” (MiCA)). This proposal is part of Digital Package, a set of measures to further develop and support the potential of digital finance in terms of innovation and competition, while mitigating risks.

The document covers cryptocurrencies that are not covered by current EU legislation on financial services, as well as electronic money tokens, and has four main objectives:

1) Legal certainty. In order for cryptocurrency asset markets to develop within the EU, a sound legal framework is needed that clearly defines the regulatory regime for all cryptocurrencies that are not covered by current financial services legislation.

2) Support of innovation. To promote the development of cryptocurrencies, it is necessary to create a secure and proportionate structure to support innovation and fair competition.

3) Appropriate level of consumer and investor protection and market integrity. Crypto assets that are not covered by current financial services legislation pose many of the same risks as more traditional financial instruments.

4) Ensuring financial stability. Crypto-assets are constantly evolving, and new categories are emerging, such as “stablecoins”, which have the potential to become widely recognized and potentially systemic. This direction includes precautionary measures to overcome potential risks to financial stability and monetary policy regulation that may arise through stablecoins.

Sources:

Text of Bill No. 3637

Proposal for a Regulation of the European Parliament and of the Council on Markets in Crypto-assets

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