Economic Setback: Ukraine Misses Out On $80-M In Taxes As Crypto Regulations Lag

Ukraine’s governmental data reveals a notable shortfall in the national budget of over $80 million during the past 10 years because of the non-compliance of cryptocurrency exchanges operating within the country. 

The Bureau of Economic Security (BEB) of Ukraine recently notified that these unrelated crypto exchanges have led to the loss of at least 3 billion hryvnia in tax revenue, roughly $80 million, spanning from 2013 to 2023. 

An in-depth examination conducted by the BEB highlighted that trades involving significant cryptocurrencies like Bitcoin (BTC), Ether (ETH), and Tether (USDT) amassed a collective trading volume exceeding $55 billion on Ukrainian-based exchanges between 2013 and 2023.

Ukraine’s Crypto Exchange Tax Shortfall And Regulatory Gaps

Regarding the estimates presented by the bureau, Blockworks, in its report, raises questions about the methodology employed due to the need for a well-defined tax structure for digital assets.

Despite this uncertainty, the BEB’s approximations point to a potential accumulation of around $445.5 million over the stated timeframe, given that trading fees typically fall between 0.1% and 1.5%.

Andriy Pashchuk, deputy director of the Economic Security Bureau, said:

“There are different points of view on how these transactions should be taxed, and [the bureau] will act by the provisions adopted by the deputies… But it is obvious that while the issue drags on, the state continues to lose tens of millions in monthly taxes.”

The absence of dedicated regulations overseeing the taxation of such transactions means that cryptocurrency exchanges are not bound by any legal obligation to remit taxes on the earnings derived from digital assets within Ukraine.

Cryptocurrency Regulation And War Efforts

In March 2022, Ukrainian President Volodymyr Zelenskyy signed a significant legislative act, “On Virtual Assets,” into law, establishing a comprehensive regulatory framework for cryptocurrencies nationwide.

During that period, the government announced its intentions to modify Ukraine’s tax and civil codes to align with the new legal structure. As of August 2023, however, the existing mandates have yet to be implemented.

In response to Russia’s ongoing invasion, which begun in February 2022, Ukraine has witnessed an influx of crypto donations from the global community, aiming to support its war-stricken endeavors.

Despite facing missile threats, especially in regions affected by the Russian military’s attacks, approximately 18% of the country’s eastern and southern territories have reportedly come under Moscow’s control. 

It’s worth noting that governmental operations and establishments in Kyiv remain under Ukrainian authority.

Featured image from Getty Images