Ukraine is actively promoting a friendly regulatory environment for blockchain/cryptocurrency projects, in both the public and private sectors. On May 18, 2020, the Ministry of Digital Transformation (MDT) launched a public consultation in relation to the draft law on the virtual assets (available here in Ukrainian). Among other things, it sets out (i) the legal status of the virtual assets; (ii) their issuance rules; (iii) the relevant regulator and scope of its powers; and (iv) the liability for a breach of conduct of business rules.
The text indicates that this draft law would apply if (i) a relevant service provider or a virtual asset issuer is either domiciled or registered in Ukraine, (ii) the parties to the relevant agreement choose Ukrainian law as its governing law, or (iii) the agreement concerning the collateral of the collateralized virtual asset would be subject to Ukrainian law.
Notably, the draft law defines a virtual asset as a separate category of property (among other special categories, such as (i) money, (ii) an enterprise as a whole property unit, (iii) currency values, (iv) securities etc.). It follows from this that the virtual assets may not be regarded as securities under Ukrainian law. Virtual assets can exist in the form of (a) crypto assets and (b) collateralized tokens (e.g., stable coins). Virtual assets can be transferred, exchanged, used as a means of payment and for investment purposes. Issuance of a virtual asset is defined as its introduction into civil circulation by means of its creation.
Virtual asset ownership right is acquired (a) as a result of creation of a virtual asset, (b) based on entering into or execution of a virtual asset (or collateral) management agreement, (c) pursuant to a requirement under a law (e.g., a separate law may confer ownership vis-à-vis a particular virtual asset), or (d) pursuant to a court order. Ownership is evidenced by the possession of a virtual asset key. The draft law provides for detailed rules on exercising ownership rights vis-à-vis the virtual assets and related collateral.
Virtual assets can be issued either in the course of a private or public offer. An offer is a “public” one if it is aimed at an unidentified number of persons and provides for the acquisition of the virtual assets pursuant to stated terms. In the case of a public offer, an issuer is required to publish a prospectus in Ukrainian, though it can be supplemented with versions in other languages as well.
The draft law defines MDT as the key governmental policy making and regulatory oversight body. In particular, it will be responsible for registration of qualified service providers (QSP), such as virtual asset custodians, virtual asset exchange service providers and virtual assets exchanges. Any QSP must meet a number of eligibility criteria set out by the draft law. The draft law was prepared in close collaboration with a group of MPs, unofficially called “Blockchain4Ukraine,” and industry stakeholders. Public consultation is open until 5 June 2020. Any proposals can be submitted to the MDT. The draft law was developed further to the adoption of the new version of the AML law (which came into force on 28 April), which partly implemented the 5th EU AML Directive acknowledging the existence of “virtual assets.”