Financial and legal regulation of the cryptocurrency market functioning in Ukraine

Shkyliov Dmytro
Роstgraduate Student of Finance, Banking and Insurance Department, Chernihiv Polytechnic National University, Ukraine, e-mail: dmitroshkilov@gmail.com, ORCID ID: https://orcid.org/0000-0002-3487-0886

Tyshenko Oleksii
Роstgraduate Student of Finance, Banking and Insurance Department, Chernihiv Polytechnic National University, Ukraine, e-mail: a_tyshenko@ukr.net, ORCID ID: https://orcid.org/0009-0006-1314-0231

Cite this article:

Shkyliov, D., & Tyshenko, O. (2024). Financial and legal regulation of the cryptocurrency market functioning in Ukraine [Finansovo-pravove rehuliuvannia funktsionuvannia rynku kryptovaliut v Ukraini], Socio-economic research bulletin, Vìsnik socìal’noekonomìčnih doslìdžen’ (ISSN 2313-4569), Odessa National Economic University, Odessa, No. 1-2 (88-89), pp. 114-128.

Abstract

The article investigates the theoretical aspects of the regulatory and legal framework formation for the crypto-assets circulation and the cryptocurrency market functioning from the standpoint of four segments of relations: the financial and legal nature of various types of crypto-instruments, the relations of their verification and circulation as payment units, relations between market subjects of their purchase and sale, relations of their conversion into fiat money. The purpose of the article is to study the current state and directions for improving the financial and legal regulation of the national cryptocurrency market functioning based on the use of the main provisions of the European Union (EU) regulations and the possibilities of their implementation in Ukraine. To achieve the purpose, the work investigates EU Regulation No. 2023/1114 «On crypto-assets markets and amendments to EU Regulations No. 1093/2010 and No. 1095/2010 and EU Directives 2013/36/EU and 2019/1937», draft laws «Cryptocurrency act of 2020» and «On financial innovations and technologies of the XXI century» of the USA, as well as provisions of the Law of Ukraine «On virtual assets». A comparison of the listed documents in terms of the completeness and adequacy reflection of legal nature of the main types of crypto-assets (unsecured cryptocurrencies, stablecoins for traditional currencies and other assets, and NFTs) made it possible to point to the EU regulation as the most complete and appropriate for the financial nature of the assets. Comprehension of the content and sequence of documents development convinces that the existing legal constructions are designed to offer cryptocurrency market participants a more standardized, predictable and transparent operating environment as an alternative to the unstable and high-risk existing practice. Analysis of the main provisions of national legislation on crypto-assets and the scope of their regulation made it possible to conclude about their imperfection in terms of ensuring effective mechanisms of state supervision and control, as well as taxation of income from transactions with cryptocurrency. Based on the study of the potential of national legislation regarding the development of mechanisms to overcome threats of a corrupt nature and risks of inefficient management of the state’s financial resources (primarily at the local level), recommendations have been developed. They include a direct prohibition to use budget funds for transactions on the cryptocurrency market and prohibition for public figures and their family members to carry out any transactions with crypto-assets, as well as the possible use of property confiscation in case of its violation. The abovementioned prohibitions should last at least until the introduction of a full-fledged and adequate legal framework for the circulation of cryptocurrencies and the functioning of their market in Ukraine.

Keywords

law; corruption; crypto-asset; regulatory and legal support; risks; cryptocurrency market; EU regulation.

JEL classification: G180; G100; K220; H830; DOI:https://doi.org/10.33987/vsed.1-2(88-89).2024.114-128

UD classification: 33.06+347.73]:336.743(477)

This work is licensed under a Creative Commons Attribution 4.0 International License. To view a copy of this license, visit http://creativecommons.org/licenses/by/4.0/

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