New Study Reveals Regulatory Challenges Faced by Web3 Startups in Ukraine
A recent study supported by Ukraine’s Ministry of Digital Transformation has highlighted the difficulties faced by web3 startups in the country due to a lack of regulation. The research report, titled “Web3 for Ukraine: Talk to Founders,” conducted by the Ukrainian Web3 Institute, emphasizes that the absence of clear guidelines on how to engage with government institutions hampers collaboration between web3 startups and these agencies.
According to the Ukrainian Web3 Institute, “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.”
The Ukrainian Web3 Institute urges the government to address these regulatory challenges promptly. The organization states that the lack of a clear regulatory framework is one of the primary reasons why web3 companies choose to incorporate abroad. Currently, there are no explicit legal regulations for registering crypto-related startups in Ukraine.
As stated by the Ukrainian Web3 Institute, “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.”
The research conducted by the Ukrainian Web3 Institute involved interviews with 50 web3 founders across 19 sectors of the web3 economy, with support from Ukraine’s Ministry of Digital Transformation.
Ukraine Prepares for FATF Compliance to Avoid Grey List
While Ukraine continues to lack clear regulations for crypto businesses, it is taking steps to implement requirements set by the Financial Action Task Force (FATF) in order to avoid being placed on its grey list. Yulia Parkhomenko, the director of the virtual assets department at Ukraine’s Ministry of Digital Transformation, warns that failure to comply with international rules could result in the country being listed.
As previously reported, draft law No. 10225-1 aims to establish regulatory norms for crypto businesses in Ukraine. The proposed law, currently under consideration by the Ukrainian Parliament, would require crypto exchanges to register with the government, perform customer due diligence, and report suspicious transactions.
Hot Take: Clear Regulations Needed for Web3 Growth in Ukraine
The lack of clear regulations is a significant obstacle hindering the growth and adoption of web3 technologies in Ukraine. Without clear guidelines on how to interact with government institutions and no explicit legal framework for registering crypto-related startups, many web3 companies are forced to incorporate abroad.
To foster innovation and collaboration between web3 startups and government agencies, it is crucial for the Ukrainian government to take immediate action in addressing these regulatory challenges. Implementing a clear regulatory framework will not only support the growth of the web3 sector but also prevent the need for companies to seek incorporation outside of Ukraine.
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