Ukrainian government reports $81M tax loss from unregulated crypto exchanges since 2013

According to data provided by the Ukrainian government, cryptocurrency exchanges offering services in the country have failed to contribute more than $81 million to the national budget in the last decade.

In an Aug. 2 notice, the Economic Security Bureau of Ukraine reported unrelated crypto exchanges were responsible for at least 3 billion hryvnia in lost taxes — roughly $81 million — from 2013 to 2023. The government body said it had analyzed the trading activity of exchanges created by residents of Ukraine, which had roughly $55 billion in Bitcoin (BTC), Ether (ETH) and Tether (USDT) volume over the same time period.

“There are different points of view on how these transactions should be taxed, and [the bureau] will act in accordance with the provisions adopted by the deputies,” said Andriy Pashchuk, deputy director of the Economic Security Bureau. “But it is obvious that while the issue drags on, the state continues to lose tens of millions in taxes every month.”

Ukrainian President Volodymyr Zelenskyy signed a piece of legislation called “On Virtual Assets” into law in March 2022, establishing a regulatory framework for cryptocurrencies in the country. At the time, the government said it was working on amending Ukraine’s tax and civil codes to accommodate the legal framework, but no amendments to existing requirements have been implemented as of August 2023.

Many Ukraine-based crypto users on Telegram questioned whether they would be required to provide “backpay” of taxes based on transactions over the last 10 years. Some pointed to the government’s failure to adopt the regulations despite the law being passed in 2022.

“If they had adopted the law […] everything would have been settled a long time ago,” said Telegram user Vini2010w. “They themselves boycotted, and now they consider it a lost profit. Idiots.”

Michael Chobanian, founder of Ukraine-based crypto exchange Kuna, told Cointelegraph it was “impossible” for government officials to take taxes on transactions before the framework was put into place. According to Chobanian, the bureau’s figures were “taken from the air” and its analytics “lacks understanding of the business”.

Related: Ukraine demands local crypto businesses provide financials

Many parts of Ukraine continue to face the threat of missile attacks following the Russian military’s invasion in February 2022, with Moscow reportedly occupying roughly 18% of the country in the eastern and southern regions. Government buildings and operations in Kyiv are within Ukrainian control.

Despite the difficulties Ukrainians at home and abroad face, many parts of the country’s tech sector have reportedly continued to grow amid the Russian invasion — roughly 5% year-on-year growth in annual export revenues. Many industry professionals also support Ukraine’s military efforts.

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Update (Aug. 2 at 6:43 PM UTC): This article has been updated to include a statement from Kuna founder Michael Chobanian.