The Ukrainian government reports an $81M tax loss from unregulated crypto exchanges since 2013.
The Ukrainian government reports an $81M tax loss from unregulated crypto exchanges since 2013.
The Blockchain Industry: Lost Taxes and Regulatory Frameworks in Ukraine
The blockchain industry continues to shape the world’s financial landscape, revolutionizing traditional systems and introducing new opportunities. However, as with any emerging technology, challenges arise, particularly in the realm of taxation and regulation. One such instance is the case of cryptocurrency exchanges in Ukraine, where failures to contribute taxes have led to considerable losses for the national budget.
The Lost Taxes
The Ukrainian government recently released data indicating that cryptocurrency exchanges operating within the country have not contributed over $81 million to the national budget in the last decade. The Economic Security Bureau of Ukraine reported that unrelated crypto exchanges alone were responsible for at least 3 billion hryvnia in lost taxes, equivalent to roughly $81 million, between 2013 and 2023.
To arrive at this figure, the government body analyzed the trading activity of exchanges created by Ukrainian residents, which had accumulated approximately $55 billion in Bitcoin, Ether, and Tether volume over the same period. These findings shed light on the significant potential revenue loss associated with unregulated transactions in the blockchain industry.
The Regulatory Framework
Recognizing the need for regulation, Ukrainian President Volodymyr Zelenskyy took a vital step in March 2022 by signing the legislation called “On Virtual Assets” into law. This landmark legislation established a regulatory framework for cryptocurrencies in Ukraine, providing a necessary structure for the industry to operate within legal boundaries. However, despite passing the law, the government has not yet implemented amendments to existing tax and civil codes as of August 2023.
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The Taxation Dilemma
The lack of clarity regarding taxation requirements has left many Ukraine-based crypto users uncertain about their tax obligations. Some have raised concerns about the potential need to pay backdated taxes based on transactions conducted over the past decade. These uncertainties arise from the government’s failure to promptly adopt the necessary regulations following the passage of the 2022 law.
The Crypto community on Telegram has been particularly vocal about this issue, questioning the government’s accountability in ensuring the timely adoption of taxation guidelines. Many argue that had the government promptly adopted the regulations, this situation could have been avoided, preventing the loss of potential tax revenue.
Analyzing the Figures
Despite the government’s claims, industry experts have cast doubt on the figures presented by the Economic Security Bureau. Michael Chobanian, the founder of Ukraine-based crypto exchange Kuna, argues that it was “impossible” for the government to impose taxes on transactions before the regulatory framework was established. He criticizes the bureau’s analysis, suggesting it lacks a deep understanding of the business. Chobanian argues that the figures presented by the bureau seem to be largely speculative and not grounded in concrete data.
The Way Forward
The case of lost tax revenue in Ukraine’s blockchain industry highlights the importance of timely and effective regulation. The Ukrainian government needs to swiftly implement the necessary amendments to the tax and civil codes to support the legal framework established by the 2022 law. This would provide clarity for taxpayers and ensure a fair and transparent system.
Moreover, industry stakeholders must play an active role in shaping these regulatory developments. By actively engaging with policymakers and offering their insights, industry professionals can help establish a comprehensive and well-informed regulatory framework.
Conclusion
The blockchain industry in Ukraine, like in many other countries, faces significant challenges in taxation and regulation. The case of lost tax revenue highlights the importance of prompt implementation of regulatory frameworks to ensure clarity and accountability. By creating a fair and transparent system, Ukraine has the opportunity to leverage its vibrant blockchain industry while maximizing tax revenue.
In the face of geopolitical challenges posed by the Russian invasion, it becomes even more crucial for Ukraine to streamline its regulatory processes. Embracing the blockchain industry can not only help foster economic growth but also demonstrate resilience in the face of adversity.
| Year | Amount Lost (in hryvnia) | Amount Lost (in USD) |
|---|---|---|
| 2013 | – | – |
| 2014 | – | – |
| 2015 | – | – |
| 2016 | – | – |
| 2017 | – | – |
| 2018 | – | – |
| 2019 | – | – |
| 2020 | – | – |
| 2021 | – | – |
| 2022 | – | – |
| 2023 | 3 billion hryvnia | $81 million |
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