Research Center of Blockchain Solutions Appealed to the Verkhovna Rada Addressing a Number of Mistakes in Two Draft Laws
25.09.2020

Research Center of Blockchain Solutions Appealed to the Verkhovna Rada Addressing a Number of Mistakes in Two Draft Laws

The specialists of the Research Center of Economic and Legal Solutions in the Area of Application of Distributed Ledger Technologies (Research Center of Blockchain Solutions) conducted analytical research of two Draft Laws of Ukraine: “On Amending the Tax Code of Ukraine and Other Laws of Ukraine Related to Taxing Operations with Crypto-Assets” No. 2461 dated November 15, 2019 (hereinafter referred to as “Draft Law No. 2461”) and “On Virtual Assets” No. 3637 dated September 14, 2020 (hereinafter referred to as “Draft Law No. 3637”). This research was conducted to identify how correct the mentioned Draft Laws are from the standpoint of unique features of distributed ledger technologies, related terms and correspondence to the clauses of the applicable legislation.

Thus, as a result of researching Draft Law No. 2461, a number of violations and flaws have been identified that include:

  1. Absence of a systematic approach to regulating the area of application of virtual assets, which is caused by the need to adopt field-specific laws first.
  2. Presence of significant contradictions between Draft Law No. 2461 and another legislative initiative in the field of regulating virtual assets with partially identical list of
  3. initiators, People’s Deputies, namely Draft Law of Ukraine “On Virtual Assets” No. 3637 dated June 11, 2020, which has indicators of a field-specific law.
  4. Violation of the Rules of Creating Draft Laws and Main Legislation Requirements:
    • Contradictions between the clauses of Draft Law No. 2461 and the clauses of the applicable legislation in terms of terminology, which can lead to failure of Ukraine to conform with its international obligations regarding prevention of money-laundering, financing of terrorism and financing of proliferation of weapons of mass destruction.
    • Contradictions between the clauses of Draft Law No. 2461 and the clauses of the applicable legislation in terms of references to non-existing clauses of the Tax Code of Ukraine in order to amend them.
    • Draft Law No. 2461 does not have an economic substantiation.
    • Draft Law No. 2461 contains clauses that violate the principle of legal certainty.
  5. Substantial mistakes in Draft Law No. 2461 due to lack of understanding of the nature of virtual assets by the authors of the legal act draft.

The following violations and flaws have been found in Draft Law No. 3637:

  1. Contradictions between international obligations of Ukraine, draft laws and applicable laws:
    • Contradiction between the definition of the key term “virtual asset” and the definition specified in the applicable legislation.
    • Significant contradictions between Draft Law No. 3637 and another initiative in the field of regulating virtual assets with a partially identical list of initiators, People’s Deputies, namely Draft Law No. 2461.
  2. Mistakes in terminology caused by the complex nature of virtual assets:
    • Inaccuracies in terminology and grounds for misinterpretation.
    • Mistakes in the content caused by the limited understanding of the nature of distributed ledger technologies by the authors, which will cause difficulties in administration of law.
    • Logical mistakes in the relevant description of the legal framework for virtual assets and consequences of operations with virtual assets.
  3. Conceptual mistakes related to understanding of the objective of legal regulation of the field of virtual assets:
    • A lot of attention is paid to giving the Ministry of Digital Transformation of Ukraine extensive regulatory power.
    • Complete accountability of small and IT businesses before the government cannot be a state’s priority in the global world.

We would like to point out that the specialists of the Research Center of Blockchain Solutions continue working on the alternative Draft Law, which will eliminate all inaccuracies and mistakes of Draft Law No. 2461 and Draft Law No. 3637, and which will soon be presented for public discussion.

We would also like to inform you that the Research Center of Blockchain Solutions sent official statements regarding Draft Law No. 3637 dated September 14, 2020 and Draft Law No. 2461 dated November 15, 2019 with detailed description of their inaccuracies to the leaders of the Verkhovna Rada of Ukraine; chairpersons, co-chairpersons, deputy chairpersons of deputy factions; leaders of secretariats of deputy factions; representatives of the National Bank of Ukraine, National Securities Commission and State Tax Service in order for them not to support the adoption of the Draft Laws. The authors of these Draft Laws were also sent statements aiming for significant improvement of the Draft Laws.

You can find the official statements of the Research Center of Blockchain Solutions in PDF by following the links below:

  1. For Draft Law “On Amending the Tax Code of Ukraine and Other Laws of Ukraine Related to Taxing Operations with Crypto-Assets” No. 2461 dated November 15, 2019.

    На русском языке: https://www.blockchainukraine.org/obrashenie-po-proektu-zakona-ukrainy-o-vnesenii-izmenenij-v-nalogovyj-kodeks-ukrainy-i-drugie-zakony-ukrainy-otnositelno-nalogooblozheniya-operacij-s-kriptoaktivami.pdf

    Українською мовою: https://www.blockchainukraine.org/zvernennya-shodo-proektu-zakonu-ukrayini-pro-vnesennya-zmin-do-podatkovogo-kodeksu-ukrayini-ta-inshih-zakoniv-ukrayini-shodo-opodatkuvannya-operacij-z-kriptoaktivami.pdf

  2. For Draft Law “On Virtual Assets” No. 3637 dated September 14, 2020.

    На русском языке: https://www.blockchainukraine.org/obrashenie-po-proektu-zakona-ukrainy-o-virtualnyh-aktivah.pdf

    Українською мовою: https://www.blockchainukraine.org/zvernennya-shodo-proektu-zakonu-ukrayini-pro-virtualni-aktivi.pdf