NCSSM explains how it will regulate Ukraine’s virtual assets market

In the updated draft law on virtual assets adopted by the Verkhovna Rada of Ukraine, partial market regulation and licensing of cryptocurrency companies are entrusted to the National Commission on Securities and the Stock Market (NCSSM). ForkLog has learned from the agency how it will regulate the market.

Under the document, oversight of the industry’s operations is split between the National Commission on Securities and the Stock Market and the National Bank of Ukraine. The NBU is responsible for VA backed by monetary assets, while the NCSSM is responsible for all other types of virtual assets.

Representatives of the NCSSM, in talks with ForkLog, said, “The Commission and the National Bank will regulate only secured VA. The NBU will regulate money-market instruments, while the NCSSM will regulate financial-market instruments and others backed by tangible assets.”

“The enacted law does not regulate cryptocurrencies, but it establishes regulation of service providers connected with them — this will also be handled by the National Commission,” said the NCSSM.

ForkLog contacted the law’s drafters for clarification, and they confirmed that cryptocurrencies fall under the Commission’s remit.

To monitor VA operations, the Commission plans to use instruments similar to those used for tracking activity in capital markets.

“First and foremost, it’s about receiving the relevant reports from licensees and their subsequent analysis,” said Yuriy Boyko, a member of the NCSSM.

Under the enacted law, VA market service providers may store/manage, exchange, transfer VA, and provide intermediary services related to such assets.

To operate legally in the VA market, providers must obtain authorisations from the NCSSM — they must form charter capital, implement KYC/AML policies, and comply with other regulator requirements. The permissions are valid for one year.

All platforms approved by the NCSSM are entered into a special registry. It will be created on the basis of the Integrated Information System.

The regulator may suspend the license of a crypto exchange or exchange service if they violate Ukrainian law.

The “On Virtual Assets” law will take effect only after amendments to the Tax Code are adopted. It will separately spell out tax treatment of cryptocurrencies.

“For some time the National Commission will be in the process of preparing regulatory documents. Without them and changes to the Tax and Civil Codes, the VA market cannot operate,” said Yuriy Boyko.

In the NCSSM ForkLog was told that it would focus on creating incentive instruments for the industry, protecting the rights and interests of investors.

The NCSSM emphasized that it is open to dialogue with industry participants to discuss and develop the regulatory framework.

Earlier, in September 2021, the Verkhovna Rada adopted the VA law, but President Volodymyr Zelensky returned it for reconsideration with his proposals.

According to the president’s proposals, the law removed the need to create a dedicated body to regulate the industry and excluded the Ministry of Digital Transformation, which was to temporarily perform its functions.

The rest of the provisions of the enacted document do not differ from the bill approved earlier:

In the Ministry of Digital Transformation said to ForkLog that abandoning the creation of a new organ may speed up the market’s launch. The ministry also stressed that it is interested in building an efficient and developed digital economy of Ukraine, of which the VA industry will be a part.

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