Syed Rahman explains the situation outlined in a recently-published report.
A report by the Royal United Services Institute (RUSI) says that Ukraine has been losing billions of US dollars in budget revenues due to cryptocurrency-related crime.
RUSI, which is a UK defence and security think tank, believes that proper oversight of Ukraine’s crypto sector could help the country recover $10 billion or more. It says that everyone from career criminals through to corrupt officials and even Russian military figures have been exploiting Ukraine’s unregulated crypto market.
While Ukraine has one of the highest crypto ownership rates in the world, it does not have a comprehensive framework for digital currencies. As a result, those looking to make illegal gains are profiting and the government is losing huge amounts of potential revenue.
Although Ukraine passed a law relating to virtual assets in 2022, this was at the time that Russia was about to begin its invasion of the country. The law was never enforced and there has been little or no oversight of crypto activity in the country - and no prospect of the government obtaining revenue that it could have raised if a proper legal framework for crypto had been brought into use.
Problems
Apart from crypto-related risks that affect all parts of the globe, RUSI highlights particular acute problems that Ukraine faces: the use of over-the-counter (OTC) activities in the country, cryptocurrency being employed to procure sanctioned items for the Russian army and the exploitation of money mules.
RUSI states that restrictions imposed by the National Bank of Ukraine (NBU) to prevent “capital flight’’ (the sudden, large-scale movement of financial assets and capital out of a country) when the invasion began led to a sudden increase in both the use of crypto and the opportunities for illegal financial activity. The use of crypto drop schemes involving social media and encrypted apps has been estimated to be costing Ukraine’s state budget $24 million dollars every month.
With Ukraine having begun accession negotiations with the European Union (EU) in June 2024 - after applying for membership in February 2022, when Russia invaded - its government is set to introduce a series of reforms. These reforms will include aligning its crypto legislation with the relevant EU rules – something that is expected to be complete by the end of this year. Two extra pieces of legislation, which will incorporate the provisions of Europe’s Markets in Crypto Assets (MiCA) regulation into Ukrainian law, are still being considered.
Challenges
But Ukraine is in a situation where it faces a number of challenges when it comes to addressing its crypto-related problems. It will be attempting to ensure regulatory compliance without having a specific regulator. The country is looking at having two different regulators, based on the type of entity involved. It also has a lack of public sector expertise (which is not unique to Ukraine) when it comes to tackling illicit activities.
Training the regulators will require great collaboration with the private sector if the country is to stay abreast of developments – something that would require time and investment from a Ukrainian government having to deal with the huge strains of war.
Yet the government is doing what it can. On the 7 September 2025, the first reading of an “On virtual assets” bill was passed by legislators to legalise cryptocurrency in the nation and set up a tax framework. Profits from crypto will be included in annual taxable income and be taxed at 18% and a 5% military tax.
