The NSSMC explained how the virtual assets market would be regulated in Ukraine

The NSSMC is authorized to perform partial regulation of the market and licensing of cryptocurrency companies according to the updated draft Law on Virtual Assets, adopted by the Verkhovna Rada of Ukraine (hereinafter – the Law). ForkLog asked the NSSMC how the market would be regulated.

According to the Law, the NSSMC and the National Bank of Ukraine jointly control the industry. The NBU is in charge for the virtual assets with currency values, and the NSSMC is in charge for all other types of virtual assets.

Disclaimer

The Law divides virtual assets into unsecured (these include cryptocurrencies) and secured. The second group includes financial virtual assets with currency values, and financial virtual assets, secured by a security or derivative financial instrument.

“The NSSMC and the NBU will regulate only the secured virtual assets. The NBU will regulate the money market instruments, and the NSSMC will regulate financial market instruments and other instruments secured with material values”, the representatives of the NSSMC said to the ForkLog.

“The adopted Law does not regulate cryptocurrencies, but establishes the regulation of service providers associated with it. The NSSMC will also be responsible for this”, the NSSMC said.

ForkLog asked the drafters of the Law for clarification and they confirmed that they had referred cryptocurrencies to the jurisdiction of the NSSMC.

The NSSMC plans to apply instruments similar to those used to monitor the capital markets in order to control transactions with virtual assets.

“First of all, we are talking about obtaining the relevant reports from licensees and their further analysis”, Yurii Boiko, the Commissioner, said.

Pursuant to the adopted Law, the service providers of the virtual assets market may hold/manage, exchange, transfer virtual assets and provide intermediary services related to such assets.

The suppliers have to obtain permission from the NSSMC for being legalized in the market. They have to form an authorized capital, implement KYC/AML policies and meet other requirements of the Regulator. The validity period of such permission is one year.

All the platforms approved by the NSSMC are included in a special register. It will be created on the basis of the Integrated Information System.

The Regulator has the right to suspend the permission of the exchange or exchanger, if they violate the Ukrainian legislation.

The Law on Virtual Assets will come into force only after the adoption of amendments to the Tax Code. The Law will separately specify the peculiarities of taxation of cryptocurrencies.

“The NSSMC will be in the process of preparing regulatory documents for some time. The work of the virtual assets market is impossible without it and without changes to the Tax and Civil Codes,” Yurii Boiko said.

The NSSMC told ForkLog that the NSSMC would focus its efforts on creating stimulating instruments for the industry and on protecting the rights and interests of investors.

The NSSMC stressed that the Regulator is open to dialogue with industry participants in order to discuss and develop a regulatory framework.

The Verkhovna Rada adopted the Law on Virtual Assets, but the President of Ukraine, Volodymyr Zelenskyy, returned it for reconsideration with his proposals in September, 2021.

According to the President’s proposals, the necessity of creating a special authority  for the regulation of the industry was removed from the Law, and the Ministry of Digital Transformation, which was supposed perform its functions temporarily, was excluded from the Law too.

The other provisions of the adopted document do not differ from the draft Law approved earlier.

The Ministry of Digital Transformation told ForkLog that the refusal to create a new authority could accelerate the launch of the market. The Ministry is interested in creating an efficient and developed digital economy in Ukraine, part of which will be the virtual assets industry.

The source: ForkLog