The article brings to light the staggering revenue loss incurred by Ukraine due to ambiguous crypto regulations.
Impact of Regulatory Ambiguity on Ukraine’s Crypto Sector
Detailing the consequences of a lack of clear regulatory frameworks and their substantial impact on the country’s economy.
This article serves to expose the significant economic toll Ukraine has faced due to the absence of a structured regulatory framework for cryptocurrencies.
Ukraine’s Kuna, the largest crypto exchange in the country, commissioned a study that reveals the country’s substantial loss in revenue, amounting to $52.9 billion since 2016. This loss, attributed to the absence of a defined regulatory framework, covers taxes and other activities related to the crypto market.
The research, jointly conducted with the Ukraine Economic Outlook and the Blockchain Association of Ukraine, highlights the influx of $331 billion in “real funds” into the crypto market since 2013. This substantial capital flow significantly bolstered the market’s capitalization, reaching $1.2 trillion by mid-2023 and peaking at $2.2 trillion in 2022. The figures encompass various forms of investment, including ICOs, IDOs, IEOs, stablecoin transactions, and other investment activities.
The absence of regulatory clarity has cost Ukraine an estimated $7.6 billion each year since 2016, surpassing the country’s military budget by a significant $2 billion. Mykhailo Kukhar, founder and chief economist of Ukraine Economic Outlook, attributes this substantial loss to several factors, including cheap electricity for crypto miners, limited investment opportunities for the population, and restricted liquidity in foreign exchange instruments within the country.
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The study indicates that Ukraine had the potential to claim up to 16-17% of the global crypto-mining market share at non-preferential prices. However, due to ongoing conflicts with Russia, this share has drastically plummeted to 1%.
In a bid to combat tax evasion, the Economic Security Bureau of Ukraine initiated a pretrial investigation against local crypto trading platforms in September 2023. Suspected tax evasion by these platforms is estimated to have led to an $80 million loss in tax revenue.
An official statement from ESB revealed that Ukrainian crypto exchanges generated $445 million in trading fees over a decade. Domestic trades involving Bitcoin, Ethereum, and Tether accounted for a staggering volume of more than $55 billion from 2013 to 2023.
This revelation underscores the urgency for clear and effective crypto regulations in Ukraine to harness the potential economic benefits of the crypto market and prevent further revenue loss.