Bitcoin Is Not Illegal: Summary of Ukraine’s Bitcoin Regulation Roundtable
A roundtable on Bitcoin’s legal status in Ukraine was held on May 19 in the country’s capital of Kyiv.
The meetup featured representatives of Ukraine’s Bitcoin and blockchain industries, including developers and experts in IT laws. They discussed the issues of regulation, de-regulation, and legal execution of cryptocurrency operations in Ukraine considering modern-day legal environment.
Valentin Pivovarov opened the meeting with his presentation on issues related to the lack of any legal status of Bitcoin in Ukraine. In his opinion, this mostly renders any attempts to protect Bitcoin-related property rights impossible. Additionally, he said, this causes troubles to legal entities when they want to legalize their cryptocurrency profits, and may even result in criminal prosecution.
Bitcoin: A Judical Perspective
Oleksii Konashevych, spokesperson for the Reanimation Package of Reforms, raised the question of Bitcoin’s very essence, and the way regulators perceive it. In his opinion, Ukraine’s legal framework currently does not allow determining Bitcoin as money, as sellers are not obliged to accept cryptocurrencies even though they are a means of payment. Similarly, Bitcoin is not a determined commodity. Eventually, he believes, the government may consider Bitcoin a capital asset, which may result in additional taxation should its price grow. At the same time, most countries consider Bitcoin a commodity, Konashevych said.
According to Lasha Antadze, team lead at the project for development of blockchain auctions for privatization of public property and IDF spokesperson, economically Bitcoin is surely a commodity, just like gold or fiat money. He thinks that the question is about the way of regulation, and whether it is really necessary.
Konashevych said that even now Ukraine has sufficient legal background for cryptocurrency legalization, however, government departments lack understanding of what Bitcoin is. They feel cryptocurrencies are something new and potentially dangerous. However, the National Bank does not classify Bitcoin as a financial service, so exchanging it for UAH is totally legal. Konashevych stated that other national authorities have to understand it as well, and to coordinate their activities in the realm of cryptocurrency legalization.
Is Regulation Necessary?
Legal ambiguity of cryptocurrencies results in business downturn. Pavel Kravchenko, co-founder of Distributed Lab, noted that â€śthose who play fair fear that it will become illegal, while those playing unfair are afraid that it will become legal.â€ť No business would ever welcome ambiguity, especially when it comes to government interaction.
Some lawmakers have been concerned that cryptocurrencies might be employed in funding illegal operations. However, the experts say, such allegations have no grounds.
â€śThis arguement fails because in 100% of bribes [in Ukraine] they use cash. To date, there’s been only one instance of Bitcoin bribery, and even then the parties couldn’t agree on the price and eventually fought. It’s the same for illegal trade in arms. There are enormous amounts in cash, while in cryptocurrency they are null,â€ť says Artem Afian, managing partner at legal company Juscutum.
At the same time, blockchain technology is a source of future opportunities yet to be understood. However, even now it’s clear that they may cause the society to change. Some nations, like the UK, minimize regulation and do their best to promote blockchain-related projects in their jurisdiction.
Andrei Dubetski of Bitcoin Foundation Ukraine said that the government should consider interacting with markets in a modern-day way. In particular, regulators could use so-called Coding Law approach to propose their own improvements to Bitcoin’s blockchain on equal terms with other market players.
Some participants of the discussion also said that calling a moratorium on regulation of cryptocurrency, and licensing of cryptocurrency-related companies could be a good idea.
Toly Kaplan, founder of ForkLog, has been supportive about the moratorium and licensing idea.
â€śIn terms of the modern-day paradigm, we shouldn’t be hasty about regulation of digital currencies. I think, moratorium on Bitcoin regulation and, possibly, licensing of cryptocurrency companies could be the best solution, for the purpose of consumer protection in the first place. The main problem here is whether this procedure can do without any red tape stuff,â€ť Kaplan said.
Bitcoin Is Not Illegal
Artem Afian exemplified London’s initiative on storing medical data or accountancy for humanitarian supplies on blockchain. The expert has been very straightforward about regulation:
â€śUkraine doesn’t need to determine any specific status for Bitcoin. We only need a statement that it’s not illegal,â€ť he stated.
Notwithstanding the skepticism of the meetup’s participants in regard of governmental capability of controlling cryptocurrencies, the legal expert noted a single jurisdiction cannot destroy Bitcoin’s blockchain. However, blockchain could be used for controlling private living unless people seek for legal certainty.
Definitely, when it comes to more liberal countries, risks of prohibition go down. According to Vlad Kogan, founder of Coinessa, waging a war with Bitcoin is like fighting with wind or trying to regulate the way it blows. Kogan thinks the question lies in legal execution of activities carried out by law-abiding citizens. Legal vacuum creates negative stimuli, he believes.
Nick Polatayko, chairman of Ukrainian Bar Association, agreed.
â€śTechnically speaking, it’s possible to regulate economic activities related to Bitcoin. One cannot regulate blockchain, as it’s similar to regulating the Earth’s revolution around the Sun. As a citizen and a lawyer, I want no regulation. However, there are problems of reflecting Bitcoin in the books or protecting property rights. So I stand for reasonable mentioning of Bitcoin in regulatory frameworks,â€ť he said.
The expert also noted that as Bitcoin is often used for profiting from trades at cryptocurrency exchanges, i.e. as a financial tool, imposing VAT on such revenues might weaken stimuli for running a legal business. He believes that transparency is the corner stone here.
Commenting on the issue to ForkLog, Artem Afian clarified the difference between prohibitive regulation that the market fears, and regulation enabling legal business operations:
â€śFirst, some link Bitcoin to the idea that nation states should not regulate it. So this part of the society is negative about any regulation. But, as a lawyer, i have to assume that Bitcoin may be totally banned. Second, I believe we need some rules, as currently there are noÂ multi-millionÂ Bitcoin businesses inÂ our country, except for early miners and investors. It means that business cannot develop further without rules. We cannot build a skyscraper on the sand. Absence of regulation is good only when you do something new, when you have a startup. Now, the most important thing is that the government should let everybody know it’s not illegal. It should set the rules of the game, and answer the question what to do with value added tax.â€ť
Another participant of the meetup, Nestor Dubnevych, also shared his conclusions in regard of the discussion:
â€śIn my opinion, the discussion has led us to the conclusion that the government should recognize that cryptocurrencies exist, that they are not some sort of non-existent commodity as determined by the court, not a money surrogate as determined by the National Bank, and not e-money as determined in appeals from law enforcement agencies. They just should agree that cryptocurrencies exist, and they’re totally legal. This approach may solve two problems. First, we’ll be able to see how Bitcoin behaves in economy if the nation state recognizes its existence. The technology is too young to determine whether it’s money, securities, or some other kind of assets. Secondly, when the government acknowledges there is a new object of transactions, there will be no more allegations that Bitcoin is a Ponzi scheme or some other evil devised under secret order of a Nakamoto. The level of public trust will grow. So even now we may rest assured that the initiative of public discussions in our society is not the last. The society will keep on gaining momentum after such meetings. We’re definitely sure it will eventually result in positive changes in legal environment of our country when it comes to work with Bitcoin.â€ť
Notwithstanding the variety of opinions as to cryptocurrency regulation, the majority of the participants agree that regulators have to be well-informed in the first place. The experience of Her Majesty’s Treasury might be especially useful here. Ukraine’s National Bank could issue a public query to the leading market participants as to the specificity of legal relations in the realm of cryptocurrencies.
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