Regulatory void shackles web3 startups in Ukraine, report says

New research supported by Ukraine’s Ministry of Digital Transformation says the lack of regulation forces web3 startups to incorporate in foreign jurisdictions.

A new research report conducted by the Ukrainian Web3 Institute, titled “Web3 for Ukraine: Talk to Founders,” has outlined the key issues that have hindered the adoption of web3 technologies in war-torn Ukraine. According to the document, the lack of clear guidelines on how to interact with government institutions has made it difficult for web3 startups to collaborate with government agencies.

“Projects are ready to cooperate with government institutions and even provide them with their products free of charge, but the employees of the institutions themselves refuse to do so due to the lack of clear official rules for working with web3 technologies.”

Ukrainian Web3 Institute

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The Ukrainian Web3 Institute has called on the Ukrainian government to take immediate action to address the regulatory challenges facing the web3 sector, saying the lack of a clear regulatory framework is “one of the reasons for the incorporation of web3 companies abroad.” As noted by the organization, there are “no clear legal regulations” to register crypto-related startups in Ukraine so far.

“In Ukraine, investment funds do not have mechanisms to legally purchase cryptocurrencies for fiat. There are no clear rules for the official work of Ukrainian web3 companies with foreign counterparties.”

Ukrainian Web3 Institute

To prepare the research, Ukrainian Web3 Institute interviewed 50 Ukrainian web3 founders from 19 sectors of the web3 economy with the support of the Ministry of Digital Transformation in Ukraine.

While the country is yet to develop clear rules for crypto businesses, Ukraine has apparently already started preparing to implement FATF’s requirements on crypto in a bid to avoid inclusion on the grey list. As per Yulia Parkhomenko, director of the virtual assets department at the Ministry of Digital Transformation of Ukraine, the country is at risk of being placed on FATF’s grey list should it fail to comply with international rules.

As crypto.news earlier reported, the regulatory norms defined in the draft law No. 10225-1 are expected to create all the necessary conditions for the operation of crypto businesses in Ukraine. The draft law, which is currently under consideration by the Ukrainian Parliament (Verkhovna Rada), would require crypto exchanges to register with the government, conduct customer due diligence, and report suspicious transactions.

Read more: Ukraine lost nearly $53b due to lack of crypto regulation

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