Head Of Blockchain Association Of Ukraine: It is Time To Set Ground Rules
Total corruption, absurd bureaucracy, peculiarities of the national mentality and cryptocurrency regulation have had a great influence on the development of blockchain in Ukraine in accordance with the laws of crypto-anarchism. Unique projects, first ATMs, clandestine developments, the “grey” cryptocurrency market, hacking attacks, illegal confiscation of equipment, theft of bitcoins by security forces, and progressive development of the blockchain-based infrastructure. Ukraine has its own atmosphere.
At the Blockchain UA conference in Kiev, Blockspoint talked to the head of Blockchain Association of Ukraine Michael Chobanian about the state of the distributed technologies in the country. Michael is a pioneer in the crypto industry development. In 2013, he formed the CIS blockchain community with the center in Kiev. On his initiative, the first bitcoin exchange Kuna appeared in Eastern Europe and Ukraine. The agency has managed to attract 274 bitcoins during the crowdsale. Moreover, Michael heads such projects as CryptoHryvnia and Blockchain Hub.
The Story Behind the Creation of the Blockchain Association of Ukraine
I was lucky to know about cryptocurrencies at the turn of 2011 and 2012. But I took this technology seriously only nine months later, in late 2012. Since the beginning of 2013, I work full time in the field of cryptocurrency. For me, this is primarily an ideology, and only then a technology. I have long been looking for the ways to change the world for the better, and have not seen any other alternatives but blockchain. And I still don’t.
The Association was not built in a single day. It was a gradual and logical process summarizing my activities since the beginning of 2014. It was when I first started covering the topic of blockchain and cryptocurrency in a public field. First, I created Blockchain Foundation Ukraine, which de jure still exists today. De facto, this organization is in the process of merging with the main company. Today, the Association is registered and presented at the World Economic Forum in Davos. We have signed memorandums of partnership with blockchain associations of Belarus, Armenia, Georgia and some other countries.
Within the organization, I used to hold thematic meetings, various events for all interested in this area. There were attempts to open Bitcoin Embassy in Ukraine, but this initiative was scaled down. Instead, a larger organization called Blockchain Hub was created. Here, we host educational events two or three times a week since March 2018.
The establishment of the Association is related to the need to create and promote the first draft law on cryptocurrency regulation in Ukraine. In fact, we represent opinions, desires, demands and aspirations of various market participants in order to convey their common position to the government.
At first, due to legal red tape, we were not focused on attracting new participants and officially registered only two companies. Now we are actively engaged in attracting new members. According to preliminary estimates, the Association will have about 50 market participants. Many companies refused to register as they did not to want to draw attention from the governmental structures.
Our Association is different because it incorporates only legal entities. These are blockchain companies focused on the Ukrainian market, such as cryptocurrency projects or blockchain-powered systems. The process of communication in the governmental bodies involves connection with legal entities through official channels. Individuals can not participate in discussions. This is how the government works.
Cryptocurrencies, Blockchain and Ukraine
Ukraine needs blockchain to fight bureaucracy, corruption, cases of abuse by authorities, and centralized databases. But real steps require political will. Right now, politicians are more obsessed with their election campaigns rather than with the introduction of real solutions that might reduce their political influence.
The Ukrainian cryptocurrency market has long been developing in wild conditions — in the absolute absence of any regulation. Now it is time to set ground rules to go on with this game. We have reached the level when it is necessary to register private limited companies and other forms of activity to enter the international market and increase the turnover. Companies need to enter the legitimate field where they can open cryptocurrency accounts and officially work with financial institutions. Banks need clear definitions and rules for working with cryptocurrencies. This is a kind of legal blockchain, since all businesses are interconnected.
The draft law on the cryptocurrency regulation has already been put on the agenda of the Verkhovna Rada of Ukraine, therefore there are chances that the status of digital assets will be defined by the end of this year. I cannot say that I fully agree with the bill that we propose. It still does not provide for the protection of small companies whose trade volume hardly reaches 150,000 UAH. Along with large enterprises, they are subject to tax liabilities of 5%, which include the war tax on cryptocurrency income. In my opinion, it is necessary to take into account the turnover of companies.
The existing tax regulation of Ukraine is unprofitable for the cryptocurrency business and its members. Nobody wants to provide services having to pay 20% taxes. The system here is obsolete — and this is the problem. The current tax code of Ukraine was formed under the Soviet Union. In an alternative reality, we would not have started forming such cryptocurrency bill, but would be engaged in reforming the whole tax system. But instead, we have to fight for the place in the legitimate field.
Conditions for doing business are extremely unfavorable in Ukraine. But if you have a look at the ranking of the world markets, you will see that Ukraine is in the top. And there are many reasons for that. Most of the developers do not have to deal with bureaucratic issues. They are free to freelance, to register their companies outside the country and at the same time physically present in Ukraine.
The hype around cryptocurrency, observed in the period from 2017 up to January 2018, has calmed down, and the number of citizens interested in this sphere has become lower. Many people just wanted to make money on cryptocurrency volatility, they did not really understand how everything works. Today we can see that our target audience is getting larger, and this is the grown-up community that burns with curiosity about the concept of blockchain and cryptocurrency technologies.
Photo: Sofya Danilova, Blockspoint