The day after El Salvador’s difficult rollout of Bitcoin as legal tender, Ukraine’s parliament—the Verkhovna Rada—has adopted a bill legalizing and regulating all virtual financial assets, including the cryptocurrency.
The new law, passed Wednesday, does not make Bitcoin or any other cryptocurrency a legal tender but allows the country to legally regulate the digital currency. “The development of a new industry will allow attracting transparent investments and will strengthen the image of our country as a high-tech state,” said Mykhailo Fedorov, Ukraine’s vice prime minister of digital transformation.
The new legislation also spells out protections against fraud for those who own or trade cryptocurrencies.
The news is triggering alarm bells for some following El Salvador’s bumpy Bitcoin rollout, which saw the Central American country adopt the cryptocurrency as legal tender and require businesses to accept it for transactions.
Despite big expectations among cryptocurrency fans, the rollout coincided with a 11.7% fall in the value of the currency on the day; the price of Bitcoin tumbled from over $52,000 to $46,472 on Tuesday, according to CoinDesk. The bet on Bitcoin by El Salvador’s president, Nayib Bukele, has prompted a selloff of long-dated Salvadoran bonds as well, pushing yields up and adding fresh pressure on the country’s debt market.
The rollout also led to an eruption of protests across the country.
But unlike El Salvador, Ukraine will not aid the rollout of Bitcoin like the Salvadoran government did by air-dropping $30 into people’s state-run Chivo (or “Cool”) digital wallets. Nor does the legislation put crypto on an equal footing with Ukraine’s national currency, the hryvnia.
The regulation will benefit society, business, and the state, says Oleksandr Bornyakov, the deputy minister of digital transformation of Ukraine, who adds that in particular, “the adoption of specialized legislation is going to stimulate the attraction of foreign exchanges to the Ukrainian market.”
Ukraine is not alone, however. As it forges ahead, it is one in a long list of countries aiming to legitimize and lean into the crypto king.
Who will follow?
Many countries have introduced Bitcoin legislation in recent months, and Latin America has been especially fertile ground.
Cuba passed a law in August recognizing and regulating cryptocurrency for “reasons of socioeconomic interest.” And places like Paraguay and Panama could be the next to follow El Salvador’s path, at least in part. Paraguay has been working for several months on a bill to create an easy crypto licensing environment, and the day after El Salvador’s adoption, a Panamanian congressman introduced a bill to promote the use of crypto in the country. (Venezuela even introduced its own cryptocurrency, the Petro, in 2018, albeit with little success.)
On the private side, Brazil is seeing companies like Visa bring cryptocurrency services to traditional banking platforms, with investments in cryptocurrencies and ETFs possible without any intermediaries or cryptocurrency payment cards.
In Europe, some EU member states also individually regulate crypto assets already, with Germany leading the way in crypto adoption with the passage in July of a law allowing Spezialfonds, or special funds, to invest as much as 20% of their portfolios in crypto.
But in many other countries where crypto is legal (though not official tender), governments are trying to tighten the lid on taxation and fraud in ways that worry proponents of the digital tokens. Many cryptocurrency traders looked on in horror as the U.S. approved the $1 trillion infrastructure bill, which contains a provision requiring “brokers” of digital assets transactions to report their customers to the Internal Revenue Service so they can be taxed.
The European Union has also begun to introduce more stringent financial regulations of cryptocurrency transfers, with a new regulatory proposal including rules that would give authorities access to sender and recipient data in a bid to help them crack down on dirty money.
Buying the dip
So far, however, El Salvador is the only country to both adopt Bitcoin as legal tender and hold it on its balance sheet. Sink or swim, this may well tether the political fate of President Bukele to the outcome of his national Bitcoin experiment.
Bukele, for one, is confident.
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