Legal Consultation on Cryptocurrency Operations Legalization

More and more countries worldwide are legalizing digital assets (cryptocurrency), allowing its use as an independent currency or commodity, depending on legislative norms. In Ukraine, the legalization process has slowed down somewhat due to the current situation, so clear norms and rules for using digital payment means have not yet been implemented.

Indeed, this is the key reason why you may need legal consultations to legalize cryptocurrency operations if you intend to use it for transactions or simply invest. Today, Lawrange experts will discuss the main features of blockchain transactions and their role in Ukraine’s legal field.

Legislative Analysis of the Cryptocurrency Market

Legal consultation is necessary because, as of 2024, there are no clear laws governing cryptocurrency transactions.

The only regulatory framework that can be loosely referred to is the “Law on Virtual Assets,” adopted back in March 2022. And then there’s bill 10225 from 07.11.23, which has yet to come into effect.

Essentially, the lack of regulation leads to cryptocurrencies being used for investment and fraud, enabling individuals to avoid paying taxes on transactions.

Does this mean that individuals or legal entities can openly conduct transactions in crypto? No, that’s why a lawyer’s assistance is needed to legalize cryptocurrency operations.

Benefits of Legal Consultation

Legal consultations are your opportunity to ensure the security of your business and leverage the advantages of crypto payments without stepping outside the bounds of your country’s legal framework.

Legal services also provide entrepreneurs with the following benefits:

• Time savings: Preventing legal problems by delegating some questions to a specialist.
• Financial gain: A deeper understanding of the situation for making economically efficient decisions.
• Confidence: Elimination of doubts about the correctness of actions and plans.
• Qualified assistance: Resolving all issues based on professional experience.
• Comprehensive information: Access to reliable data that helps in decision-making.

For these reasons, you need legal consultation, which includes a comprehensive range of services.

Legal Services for Cryptocurrency Operations Legalization

An attorney’s assistance ensures that you can seamlessly work with virtual assets within the scope of your enterprise’s activities. For example:

• Providing services in exchange for specific tokens or other types of assets in the blockchain system.
• Legalizing income through tax payment, reporting, and other regulatory requirements.
• Safely storing funds using a secure wallet without the risk of violating the law.
• Conducting an unlimited number of transactions exchanging virtual assets for fiat and vice versa.
• Receiving assistance and protection in disputes and lawsuits with counterparties or regulators.

And these are just some of the legal services offered by Lawrange. The list also includes:

• Consultations on legal regulation.
• Analysis and assessment of cryptocurrency transactions.
• Development of legal documents.
• Support for cryptocurrency operations.
• Representation in government agencies.
• Protection of rights and interests in disputes.
• Blockchain projects and startups.
• Tax consultations.
• Legal support for cryptocurrencies.

Let’s examine each of these points in more detail.

Consultations on Legal Regulation

Legal consultation is qualified assistance for entrepreneurs, provided before a business begins its activity in terms of transactions with virtual assets.

Consultation allows the organization to assess the prospects of the cryptocurrency market, study legal norms and provisions, and calculate potential benefits and risks.

Legal consultations also help determine the boundaries of trading volumes with virtual assets, establish rules of conduct with counterparties, and secure transactions.

In addition to the above, consultations contribute to preparing the enterprise for further steps in integrating cryptocurrency transactions into the corporate financial toolkit.

Analysis and Assessment of Cryptocurrency Transactions

Legal services also include the direct involvement of a specialized professional in the analysis and assessment of transactions. Specifically:

• Studying the counterparty’s activities, reputation, absence, or presence of legal issues.
• Verify the legality of the transaction’s fiat or cryptocurrency assets.
• Examination of documentation, invoices, legislation, and other factors affecting the transparency and legality of the transaction.

However, not only the above is included in legal consultations. In addition, a Lawrange specialist assists you practically in conducting transactions with crypto assets. For example, they actively participate in preparing documentation and even accompany transactions.

Development of Legal Documents

An attorney’s assistance also extends to document preparation for the transaction. Essentially, the specialist independently performs this work based on legal acts and information you provide within the scope of cooperation.

There is no need to worry about the confidentiality of information and corporate data, as the expert signs not only an employment contract with you but also a Non-Disclosure Agreement (NDA). They commit to protecting all intellectual property you provide for processing within the framework of cooperation.

Legal consultation on legalizing cryptocurrency operations, including document work, means that you can delegate part of the complex processes to a contractor. This frees up your time and resources for conducting business activities.

Cryptocurrency Operations Support

Legal consultations on the legalization of cryptocurrency operations imply that an industry specialist will accompany every step of the company’s crypto activity. This means that even during the transaction, the lawyer acts as a mediator or observer, ensuring that regulatory requirements are met and the transaction itself is legal.

Legal services mean that the expert will ensure that funds, as well as crypto assets, have a legally justified origin and do not fall under financial monitoring or regulatory scrutiny. The transaction itself will not be blocked by financial institutions due to violations of laws or corporate policies, regulator requirements, etc.

Representation in Government Agencies

An attorney’s assistance extends to physically accompanying the client to various institutions, including government ones.

For example, in courts, regulatory bodies, local or state authorities, banking institutions, on various platforms, and business summits.

In such cases, legal consultation serves as a support for the entrepreneur engaged in financial activities but may not be fully informed about the legislative framework, regulatory acts, and other aspects of jurisprudence. This is why they turn to experts, hiring them to defend their position before various authorities.

Protection of Rights and Interests in Disputes

In many cases, especially when the rights and interests of the entrepreneur are violated, legal consultations become a reliable support for defending their position. These could be direct disputes with counterparties or clashes with legislative or regulatory bodies, authorities, etc.

Dealing with legal cases is more complex because current legislation does not have clear provisions on the status of cryptocurrencies, their taxation, and declaration. In such cases, the assistance of a lawyer in legalizing cryptocurrency operations will be invaluable and will prevent manipulation by government authorities, dishonest counterparties, or other interested parties.

Blockchain Projects and Startups

Another stumbling block where legal services for legalizing cryptocurrency operations are needed is investment projects and startups. Due to the same legislative gaps, entrepreneurs may encounter problems if they decide to invest in tokens, let alone create their own crypto asset and bring it to the wider market.

The lawyer’s assistance in cases where legal opportunities are found for the entrepreneur promotes their investment activities. It not only provides advice but also gathers necessary documents, calculates risks, and constructs a lawful path to launch a personal blockchain project or cryptocurrency startup.

Tax Consultations

Legal services help entrepreneurs and their companies reduce tax fees or even remove them from the company’s expenditure. Since Bill 10225 was never passed, and cryptocurrency remained a commodity with value, there is a whole platform for manipulations often exploited by fraudsters.

In our case, the client receives a consultation to help them legalize the company’s cryptocurrency activity without violating laws or using existing loopholes.

In essence, we help conduct cryptocurrency business honestly and transparently, ensuring that regulators, tax authorities, or other financial control agencies do not persecute the entrepreneur.

Main Issues Faced by Cryptocurrency Lawyers in Ukraine and Abroad

Legal consultations on the legalization of cryptocurrency operations are necessary precisely because this segment of entrepreneurial activity is not adequately regulated by legislation. This leads to the emergence of loopholes exploited by both businesses and government authorities. Importantly, inaccuracies can be interpreted in various ways and often have unpleasant consequences.

In such conditions, legal consultation only partially solves the situation because, as a rule, lawyers also encounter a range of problems while providing such specific services.

Here are some of the issues that specialized professionals constantly deal with:

• Uncertainty of legislation.
• Complexity of taxation.
• Cybersecurity.
• Fraud risks.
• Anti-money laundering (AML) efforts.
• Lack of awareness.

Let’s take a closer look at the above through the eyes of a lawyer.

Uncertainty of Legislation

Legal consultation on the legalization of cryptocurrency operations is complicated by the lack of a clear legislative framework to regulate this matter. While there are individual norms and provisions integrated into various laws and articles, there is no comprehensive and structured law.

This leads to several problems, such as:

• Ambiguity in cryptocurrency operation rules. Legal loopholes create fertile ground for manipulation, which both business people can use for their advantage and regulators against entrepreneurs.
• Financial monitoring. Particularly, uncertainty regarding the amounts subject to scrutiny since cryptocurrency is considered a commodity but not a financial unit.
• There are no regulation algorithms for crypto assets. For example, in the same situation, authorities may interpret a company’s activity as either legal or illegal.

In practice, virtually every business dealing with cryptocurrency faces issues and accusations of dishonesty, tax evasion, and fraud.

Taxation Complexity

Legal consultations aim to address taxation issues. However, in practice, due to legislative problems, this issue is not completely resolved.

Difficulties arise even at the stage of preparing to launch cryptocurrency activities. Since cryptocurrencies are classified as commodities by law, their taxation should correspondingly be conducted. In practice, fiat currency is often featured in transactions, especially concerning processes like topping up special wallets or direct payment for goods/services using tokens.

Since there are no definitive provisions on this matter, lawyers have to regulate the issue by appealing to indirect norms and rules of various regulators, including governmental authorities.

Cybersecurity

Legal services for the legalization of cryptocurrency operations also cover transaction security, a cornerstone concern. While blockchain transactions inherently offer maximum protection, no one is entirely immune to fraud.

The role of a specialized lawyer in ensuring transaction cybersecurity is more about advising clients on establishing and maintaining a secure digital infrastructure. It also involves emphasizing basic financial literacy rules applicable to transactions involving cryptocurrencies and counterparties (individuals, intermediaries, or specialized exchanges).

Consequently, a lawyer cannot guarantee anything if the client ignores their recommendations and elementary rules of financial transactions.

Fraud Risks

Lawyer assistance is often seen as an opportunity to mitigate fraud risks. Indeed, concerning legal nuances, a specialized professional can quickly identify schemes or disguised malicious intentions of counterparties, warning the client about potential fraud opportunities.

However, when it comes to the practical aspect of transactions, namely direct transactions using blockchain and cryptocurrencies, all assistance may be purely advisory.

For instance, an expert might advise conducting additional checks on the counterparty, verifying the authenticity and accuracy of the recipient’s wallet address, and examining the reputation of the transaction participant.

Anti-Money Laundering (AML)

It’s no secret that cryptocurrencies are used for illegal schemes, such as money laundering. Everyone wishing to work in this segment sooner or later faces serious scrutiny of their activities, incomes, sources, transaction chains, etc.

Legal consultation potentially simplifies the work of “white” businesses to some extent. But remember, even the most honest and transparent entrepreneur risks being scrutinized by regulators, the National Bank of Ukraine, or other authorities and having their (fiat) funds frozen for the duration of an investigation into the legality of their activities.

Therefore, yes, a lawyer ensures that the business operates within the legal framework and avoids all suspicious counterparts involved in money laundering or other illegal schemes.

Lack of Awareness

On the one hand, legal consultations on the legalization of cryptocurrency operations genuinely help clients avoid a range of problems. On the other hand, there are situations where even an experienced lawyer is essentially helpless. For example, when a loophole in legislation is interpreted in several different ways and creates a legal stalemate from the jurisprudential standpoint.

Or another scenario where informal amendments are made to various scattered regulatory acts and documents. Depending on the nature of the changes, a crypto business that was legal just yesterday can suddenly turn into a conditional “scheme” and its owner into a criminal offender.

That’s why legal services cannot be considered a straightforward panacea. Nevertheless, only an experienced specialist can help you overcome all challenges and difficulties without significant financial and reputational losses.

List of Required Documents

The assistance of a lawyer in legalizing cryptocurrency operations begins with the specialist obtaining a basic package of documents, which will serve as the foundation for further collaboration. These include:

• Identification Package:
  • Citizen’s passport (foreign citizen’s passport).
  • Taxpayer Identification Number (TIN).
• Service Package:
  • Contract or agreement defining the nature of the service provided.
• Financial Package:
  • Bank account statement for the last three months.
  • Financial statements (optional).
• Additional Package:
  • In the case of company registration, choice of business activity form, planned name, and address.
  • In the case of providing legal consultations, provide a detailed description of the issue or situation.
• Optional Package:
  • Power of attorney or other documents confirming the authority to represent the client’s interests.

Provided the client has submitted the specified documents, they will receive legal consultation on legalizing cryptocurrency operations.

Cryptocurrency Taxes in Ukraine and Abroad

Legal consultations are also necessary because they clarify the taxation of crypto assets. Since there is no cryptocurrency law in Ukraine and there is no clear taxation system, there are certain difficulties for everyone who works with this type of currency.

For example, as long as the cryptocurrency remains in the digital realm and is not converted into fiat, all transactions involving its sale or exchange are not subject to tax.

To convert crypto into real funds, there is a tax rate of 5% VAT + 1.5% military duty. Bill 10225 was intended to increase the tax to 18% VAT + 1.5% military duty, but it is still pending approval.

That’s all the information as of March 2024.

Why Choose Lawrange

You need legal services if you plan to implement new financial instruments into your company and expand its payment capabilities. Since cryptocurrency is still not consistently regulated, you will need experts’ assistance to resolve contentious issues related to cryptocurrency activities.

The Lawrange team has been working with various segments for over 10 years and was one of the first in the Ukrainian market to address cryptocurrency regulation issues in business. Consequently, each of the Lawrange specialists has industry experience. This is precisely why you should entrust us with your project.

Conclusions

Since crypto trading and other operations involving these types of digital assets are not regulated by current legislation, businesses may encounter some problems.

Lawyer assistance is intended to resolve legal inconsistencies, allowing businesses to operate openly, honestly, and transparently.

FAQ

How much does lawyer assistance cost in legalizing cryptocurrency operations?

It depends on the complexity of the services and the current legislative situation, as well as the type and scale of the problems the business faces. Therefore, contact a Lawrange manager to clarify the cost and describe your situation.

What problems may cryptocurrency owners encounter?

The freezing of fiat funds, income source checks, fines for concealing business activities and tax evasion, criminal cases if they were involved in shadow schemes, and so on.

How to declare cryptocurrency income?

Cryptocurrency income must be entered into the “Intangible Assets/Assets” section of the declaration. However, individuals are not required to submit a tax declaration.

ORDER A LEGAL CONSULTATION ON CRYPTOCURRENCY OPERATIONS LEGALIZATION