Over the past decade, cryptoassets have transformed from a marginal financial instrument into a fully-fledged component of the global economy. At the same time, in Ukraine—which, according to the Chainalysis Global Crypto Adoption Index 2025[1], ranks among the top 10 countries leading in cryptocurrency usage worldwide—the current legislation still fails to ensure proper legal regulation of its circulation, thereby creating legal uncertainty for market participants, potential investors, and fiscal authorities.
Notwithstanding the State’s declared policy aimed at the maximum de-shadowing of the economy and efforts to identify new sources for replenishing the state budget, the legal regulation of the circulation and taxation of cryptoassets effectively remains fragmented, is characterized by the absence of a unified approach and coherence among regulatory legal acts, and therefore requires comprehensive improvement.
What Rules of the Game Does the Legislator Propose?
Despite the fact that cryptocurrencies still do not have a clearly defined legal status in Ukraine—particularly due to the absence of a harmonized regulatory framework governing their classification and the regulation of transactions involving them—the legislator has already undertaken a number of attempts to develop approaches to defining the concept and legal status of virtual assets, as well as the rules for their taxation.
The first step toward a statutory definition of the term “virtual asset” was taken at the end of 2019 with the adoption of the Law of Ukraine “On Prevention and Counteraction to Legalisation (Laundering) of Criminal Proceeds, Terrorist Financing and Financing of Proliferation of Weapons of Mass Destruction” Within the meaning of this law, a virtual asset was defined as a digital representation of value that can be traded or transferred in digital form and may be used for payment or investment purposes. This constituted the first attempt to provide a basic regulatory delineation of a technological phenomenon that was rapidly gaining widespread adoption.
The next step was the adoption, in February 2022, of the Law of Ukraine “On Virtual Assets,” which was intended to comprehensively regulate social relations associated with the creation, issuance, circulation of virtual assets, as well as the conclusion and performance of transactions involving them. The Law declared the introduction of uniform principles governing the functioning of the virtual assets market, the establishment of unified rules for the organization of trading, and the overall market infrastructure.
Under this Law, the concept of a “virtual asset” received a significantly broader, civil law–oriented definition—as an intangible good that constitutes an object of civil rights, has value, and is expressed as a set of data in electronic form. Its existence and transferability are ensured by a special system for the circulation of virtual assets. At the same time, it is provided that a virtual asset may certify proprietary rights, in particular rights of claim in respect of other objects of civil rights.
The objectives of the adopted Law, as stated by its authors, included the need to streamline the regulatory legal framework governing the virtual assets market and the activities of its participants, to determine the legal status of virtual assets as objects of civil rights, to regulate civil law relations arising in the course of their use, to define the status of market participants and users, to shape state policy in the field of circulation of virtual assets, as well as to ensure effective state regulation and supervision in the relevant market.
Despite the urgent and evident need for proper legislative regulation of the virtual assets market, in particular the necessity to enable its participants to lawfully use banking services, pay taxes on income received, and obtain judicial protection in the event of violations of their rights, the said Law, as of the date of writing this article, has not entered into force.
Pursuant to the Final and Transitional Provisions of the Law of Ukraine “On Virtual Assets,” it shall enter into force on the date of entry into force of the Law of Ukraine amending the Tax Code of Ukraine with respect to the specific features of taxation of transactions involving virtual assets, which is intended to define the peculiarities of taxation of such transactions. However, the relevant amendments to the Tax Code of Ukraine have, as of today, not yet been adopted; accordingly, the implementation of the provisions envisaged by this Law remains deferred.
At the same time, in September 2025, the Verkhovna Rada of Ukraine adopted, at first reading, the long-awaited Draft Law No. 10225-д “On Amendments to the Tax Code of Ukraine and Certain Other Legislative Acts of Ukraine Regarding the Regulation of the Circulation of Virtual Assets in Ukraine,” the provisions of which create the necessary preconditions for the entry into force of the Law of Ukraine “On Virtual Assets” and, accordingly, for the establishment of transparent rules governing the taxation and circulation of virtual assets.
Firstly, the draft law once again proposes an updated definition of the concept of a “virtual asset.” According to the said draft law, a “virtual asset” shall be defined as a type of digital thing that is created, transferred, and stored in electronic form using distributed ledger technology or similar technology. Depending on the conditions of issuance, a virtual asset may certify proprietary rights, including, inter alia, a right of claim to other objects of civil rights, and/or obligations of the issuer of the virtual asset.
The provisions of the Civil Code of Ukraine on movable property shall apply to virtual assets, unless otherwise provided by law or unless it follows from the nature of such virtual asset.
In addition, the legislator separately emphasized that virtual assets are not a means of payment within the territory of Ukraine and may not be used as a medium of exchange for property, works, or services, except in cases expressly provided by law.
Secondly, Draft Law No. 10225-д provides for the introduction of several amendments to the Tax Code of Ukraine aimed at establishing rules for the taxation of income derived from virtual assets (cryptocurrencies, tokens, etc.).
Taxation shall apply to the positive financial result (profit) obtained by an individual based on the results of the reporting year. Such result is determined as the difference between the income received in the form of funds from the sale of virtual assets, considering exchange rate differences (if any), and the amount of documented expenses incurred for their acquisition or creation (the list of allowable expenses is limited).
Not subject to taxation shall be:
- income derived from transactions involving the exchange of a virtual asset for other virtual assets;
- income derived from the sale of virtual assets received during the year, the amount of which does not exceed one minimum wage;
- the value of virtual assets received as a result of their issuance (creation) or obtained free of charge from issuers / in exchange for personal data.
An individual shall be required to independently maintain records of the financial result from transactions involving virtual assets (separately from other income and expenses), as well as to submit an annual tax declaration on property and income (by April 30 of the year following the reporting year). Profit shall be taxed at a rate of 18% personal income tax and a 5% military levy.
If, based on the results of a calendar year, the financial result is negative, the amount of the loss may be carried forward to subsequent years until it is fully offset.
In addition, a transitional regime is also envisaged for the taxation of income derived from virtual assets acquired prior to the entry into force of the law: in the event of their sale during 2026, the income of an individual shall be taxed at a preferential rate of 5% personal income tax (the military levy—5%—shall remain mandatory).
It is worth noting that the draft law requires exchange rate differences to be considered when determining the financial result from the sale of virtual assets, as is the case with other investment assets. In conditions of fluctuations in the exchange rate of the hryvnia, this may give rise to situations where an investment profit arises in the hryvnia equivalent even in the case of loss-making (in foreign currency terms) purchase and sale transactions.
Although the draft law has thus far been adopted only at first reading and its provisions may be substantially revised prior to the second reading, even at this stage it is possible to identify the key approaches that will shape the future model of legal regulation and taxation of cryptoassets in Ukraine.
What Does the Tax Authority Say?
As of today, cryptocurrency in Ukraine does not have a clearly defined legal status: there is no harmonized regulatory framework for its classification or for the regulation of transactions involving it. At the same time, such uncertainty does not prevent fiscal authorities from taxing income derived from transactions involving cryptoassets by applying the general provisions of the Tax Code of Ukraine.
According to the available clarifications of the tax authorities, income received by an individual from the sale of cryptocurrency is included in the total annual taxable income. Such income is classified as foreign income—if the source of payment is located outside Ukraine—or as other income—if the payment is made by an individual resident within the territory of Ukraine.
At the same time, the amount subject to taxation is the income actually received—namely, the total amount of funds obtained by the taxpayer as a result of transactions involving cryptoassets, without considering expenses incurred for their acquisition.
Additionally, on 17 March 2026, the Acting Head of the State Tax Service of Ukraine, Lesia Karnaukh, during a meeting with legal professionals, stated that cryptocurrency, by its economic substance, may be regarded as an asset. Accordingly, in cases where transactions involving cryptoassets generate income or are used during economic activity, they may constitute an object of taxation.
In particular, for individuals, the respective income is subject to personal income tax, while within the framework of economic activity it may potentially affect the emergence of tax liabilities for corporate income tax or value-added tax (VAT). At the same time, the specific mechanisms and tax rates are to be determined at the level of special legislation.
In the context of analyzing practical cases concerning attempts by tax authorities to tax transactions involving the purchase and sale of virtual assets, the judgment of the Luhansk District Administrative Court dated 20 April 2026 in case No. 320/32372/25[2] is illustrative.
In the case, the State Tax Service sought to assess a former individual entrepreneur nearly UAH 34 million in tax liabilities and penalties (financial sanctions), substantiating its position by asserting that the taxpayer had engaged in active cryptocurrency trading using P2P transfers without proper documentary confirmation of the expenses incurred.
The case materials indicate that in 2021 more than UAH 23 million was credited to the bank accounts of the individual entrepreneur, and in 2022 more than UAH 47 million. These amounts were reflected by the taxpayer in tax declarations as income, simultaneously indicating expenses for the acquisition of virtual assets, the total amount of which over the two years exceeded UAH 70 million. Taking such expenses into account, the net financial result of the activity remained insignificant (in particular, approximately UAH 51 thousand in 2022), from which the individual entrepreneur paid the relevant tax liabilities.
At the same time, the tax authority, referring to the absence of primary documents confirming the incurrence of expenses for the acquisition of cryptocurrency (contracts, delivery notes, acts of completed works, invoices, settlement documents, etc.), concluded that the entire cash turnover in excess of UAH 70 million constituted the entrepreneur’s net profit. Moreover, in view of exceeding the threshold volume of transactions of UAH 1 million, the State Tax Service asserted that the individual entrepreneur was obliged to register as a VAT payer, since transactions involving virtual assets, in the opinion of the tax authority, constitute transactions for the supply of goods and/or services subject to VAT.
However, the court fundamentally disagreed with such legal position of the tax authority, noting that, as of today, national legislation does not define the legal status of virtual assets and, accordingly, no mechanism has been introduced for the taxation of transactions involving virtual assets, in particular with respect to VAT.
European and International Experience
The approach of the European Union to the regulation of virtual assets was first established in Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015[3], pursuant to which a virtual currency is defined as a digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily pegged to a legally established currency and does not have the legal status of currency or money, but is accepted by natural or legal persons as a means of exchange and may be transferred, stored, or traded electronically.
Further development of the EU’s approaches to the regulation of cryptoassets occurred with the adoption, at the end of May 2023, of Regulation (EU) 2023/1114 on Markets in Crypto-Assets (MiCA)[4], which effectively established a single legal framework for the circulation of cryptoassets within the territory of the European Union. The said Regulation not only enhanced the level of protection for investors and users but also introduced transparent and harmonized requirements for crypto-asset service providers.
An important innovation of MiCA is the shift away from the narrow concept of a “virtual currency” in favor of the broader and more flexible term “crypto-asset,” reflecting the evolution of digital economic relations. In accordance with the provisions of MiCA, a crypto-asset is defined as a digital representation of value or rights that can be transferred and stored using distributed ledger technology or similar technologies.
More broadly, if one considers international practice, approaches to the taxation of transactions involving cryptoassets differ significantly depending on the jurisdiction.
Despite global convergence in the areas of transparency and reporting, tax rates and approaches to determining the tax base remain the prerogative of national governments. Analysis indicates the existence of several conceptual models—from incentive-based regimes oriented toward long-term investment to stringent progressive taxation systems.
In Germany, cryptoassets are not treated as classical investment instruments (such as shares), but are classified as private property (private assets) or so-called “private money”[5]. A key feature is the exemption from taxation of gains derived from their sale, provided they have been held for more than one year (rate — 0%)[6], which creates significant incentives for long-term investors.
Conversely, in the case of short-term transactions (less than one year), profits are taxed at progressive personal income tax rates (up to 45%), but only if the annual threshold for income from private sales exceeding EUR 1,000 is surpassed (the threshold having been increased from EUR 600 in 2024).
Until 2023, Portugal remained one of the most attractive jurisdictions due to the effective absence of taxation on income derived from cryptoassets for individuals. However, tax reforms in 2023–2024 introduced a new model largely aligned with the German approach.
As of today, in Portugal, gains derived from the sale of cryptoassets held for less than 365 days are taxed at a flat rate of 28%. At the same time, income from assets held for more than one year remains exempt from taxation (0%), allowing the country to retain its attractiveness for investors focused on long-term growth[7].
Japan, in turn, represents an example of one of the most fiscally burdensome models. Profits derived from transactions involving cryptoassets are classified as “miscellaneous income” and are included in the individual’s total taxable income. As a result, they are subject to progressive national tax rates (up to 45%), together with a fixed local inhabitant tax (10%), which in aggregate may amount to up to 55%[8].
What Do We Have in the End?
In summary, it should be noted that Ukrainian legislation still does not provide for comprehensive, systematic, and coherent regulation of the circulation and taxation of cryptoassets, despite the rapid growth of their use and their significant role in the global market. Existing legislative initiatives, in particular Draft Law No. 10225-д, while forming the basis for the introduction of a comprehensive approach to defining the legal status and taxation of cryptoassets, have not yet been implemented in practice.
Under these circumstances, notwithstanding the existence of objective prerequisites for the further development of the national digital economy, the intensification of innovation activities, and the provision of additional revenues to the state budget through the taxation of transactions involving virtual assets, continued delay in the adoption and proper implementation of the relevant legislative changes will result in the persistence of regulatory uncertainty.
The situation described above will not only restrain the development of the national virtual assets market but will also limit the State’s ability to exercise effective fiscal control, which, in turn, will have a negative impact on Ukraine’s competitiveness in the global digital environment and will hinder the growth of the revenue side of the state budget.
[1] https://www.chainalysis.com/blog/2025-global-crypto-adoption-index/
[2] станом на момент підготовки цієї статті рішення не набрало законної сили.
[3] https://zakon.rada.gov.ua/laws/show/984_037-15
[4] https://eur-lex.europa.eu/eli/reg/2023/1114/oj/eng
[5] https://www.cryptact.com/en/blog/crypto-tax-free-country-top-crypto-friendly-nations-2025-guide
[6] https://immigrantinvest.com/blog/crypto-tax-havens/
[7] https://coincub.com/ranking/global-crypto-tax-report-2025/