Ukraine Probes Local Crypto Exchanges for Tax Evasion

Ukraine’s Eco­nom­ic Secu­ri­ty Bureau (ESB) is inves­ti­gat­ing local cryp­tocur­ren­cy exchanges. This action comes in response to the bureau’s dis­cov­ery that unreg­u­lat­ed exchanges oper­at­ing in the coun­try have led to a loss of 3 bil­lion Ukrain­ian hryv­nia (over $80 mil­lion) in uncol­lect­ed taxes.

Ear­li­er, Ukrain­ian reg­u­la­tors vot­ed to tax cryp­to gains 18% as of 2024. Mean­while, Kyiv has been work­ing to align its cryp­tocur­ren­cy reg­u­la­tions with the Euro­pean Union (EU) in recent weeks to intro­duce reg­u­la­to­ry mea­sures that adhere to the prin­ci­ples laid out in the EU’s Mar­kets in Cryp­to-Assets (MiCA) legislation.

Ukraine Intensifies Probe Into Crypto Exchanges

Andriy Pashchuk, the head of Ukraine’s Eco­nom­ic Secu­ri­ty Bureau (ESB), stat­ed in an inter­view with Forbes Ukraine that the inves­ti­ga­tion focus­es on trad­ing plat­forms with locals as ben­e­fi­cia­ries. He dis­closed that ESB ana­lysts use data ser­vices like Chainal­y­sis and Crys­tal Blockchain to track cryp­tocur­ren­cy trans­ac­tions meticulously.

In addi­tion to on-chain data, the ESB incor­po­rates open-source intel­li­gence (OSINT) insights to assess the over­all cryp­tocur­ren­cy turnover with­in dig­i­tal wal­lets on Ukrain­ian exchanges.

Pashchuk men­tioned that the bureau is con­duct­ing a pre­tri­al inves­ti­ga­tion against enti­ties par­tic­i­pat­ing in the local cryp­tocur­ren­cy mar­ket. How­ev­er, he did not pro­vide spe­cif­ic details regard­ing the cur­rent stage of the pre­tri­al investigation.

In August 2023, the Eco­nom­ic Secu­ri­ty Bureau (ESB) released an offi­cial state­ment indi­cat­ing that Ukrain­ian cryp­to exchanges had accu­mu­lat­ed approx­i­mate­ly $445 mil­lion in trad­ing fees over the past decade. Accord­ing to the bureau’s cal­cu­la­tions, trans­ac­tions involv­ing Bit­coin (BTC), Ethereum (ETH), and Teth­er (USDT) with­in the domes­tic mar­ket totaled more than $55 bil­lion from 2013 to 2023.

Ukraine’s Crypto Regulatory Framework

Andriy Pashchuk, deputy direc­tor of the Eco­nom­ic Secu­ri­ty Bureau, point­ed out that there are dif­fer­ent points of view on how these trans­ac­tions should be taxed, and the bureau will act under the pro­vi­sions adopt­ed by the deputies. He empha­sized that while the issue remains unre­solved, the state con­tin­ues to expe­ri­ence sig­nif­i­cant month­ly tax rev­enue losses.

In March 2022, Ukrain­ian Pres­i­dent Volodymyr Zelen­skyy signed the “On Vir­tu­al Assets” leg­is­la­tion, estab­lish­ing a reg­u­la­to­ry frame­work for cryp­tocur­ren­cies. Con­cur­rent­ly, the gov­ern­ment expressed its com­mit­ment to revis­ing Ukraine’s tax and civ­il codes to align with this new­ly estab­lished legal framework.

A sig­nif­i­cant num­ber of cryp­tocur­ren­cy users in Ukraine, dis­cussing the mat­ter on Telegram, raised con­cerns about whether they would be oblig­at­ed to pay tax­es for trans­ac­tions con­duct­ed over the past decade retroac­tive­ly. Some indi­vid­u­als high­light­ed the government’s delay in imple­ment­ing reg­u­la­tions despite the law’s pas­sage in 2022. This uncer­tain­ty has led to wide­spread ques­tion­ing and con­fu­sion among the cryp­to com­mu­ni­ty in Ukraine.