Ukraine's parliament passed the first reading of its crypto legalization bill with 246 votes, establishing a 23% combined tax rate on virtual asset profits while addressing critical regulatory gaps that have enabled billions in illicit flows.
The legislation proposes an 18% personal income tax plus 5% military levy on crypto gains, with preferential 5% rates for fiat conversions during the first year of implementation.
Lawmaker Yaroslav Zhelezniak confirmed the bill's passage but noted significant changes expected before the second reading.
The regulatory authority remains undetermined between the National Bank of Ukraine and the National Securities and Stock Market Commission, while implementation details require further parliamentary approval.
The vote comes as Ukraine faces estimated losses of at least $10 billion in stolen funds and tax revenue due to insufficient crypto regulation, according to the Royal United Services Institute.
Over-the-counter markets and wartime vulnerabilities have transformed the country into a growing hub for money laundering and cyber-enabled crime.
RUSI warned that without urgent reforms, Ukraine risks further exploitation of its financial system while losing vital tax revenue.
The security think tank identified Ukraine-specific risks associated with OTC activities, its role as a threat hub, and the role of crypto in funding the procurement of sanctioned components for Russian military operations.
Despite adopting virtual asset legislation in early 2022, Ukraine has failed to implement the framework due to the absence of tax provisions.
Under EU accession requirements, the country must align crypto rules with European standards by the end of 2025 or face potential Financial Action Task Force status downgrades.
Domestic criminal networks exploit vulnerable citizens through "money mule" schemes costing an estimated $24 million monthly.
These operations offer as little as $120 for individuals to launder money through their bank accounts, while Telegram-based drug trafficking operations accept crypto payments.
Russian-linked crypto laundering activities also spread beyond Ukraine through networks in Kyrgyzstan and other regional jurisdictions.
UK and US sanctions targeted networks tied to rouble-pegged stablecoin A7A5 and exchanges suspected of continuing sanctioned Garantex operations after the March 2025 law enforcement disruption.
Kyrgyzstan's transformation into a crypto hub following its January 2022 virtual asset law enabled Russian sanctions evasion efforts.