Ukrainian president Volodymyr Zelenskyy has enacted a law officially making cryptocurrencies legal in the besieged country.

The new law, which received the president’s signature on Wednesday, will allow foreign and Ukrainian crypto exchanges to operate legally in Ukraine in what is being seen as a vital step to developing a legal market for virtual assets in the country.

Moreover, the new law will also create a regulatory framework for an open crypto market in Ukraine for the first time.

“The signing of this law by the president is another important step towards bringing the crypto sector out of the shadows and launching a legal market for virtual assets in Ukraine,” the Ministry of Digital Transformation said in a statement published on its website on Wednesday.

The draft “On Virtual Assets” law was first passed in a near-unanimous vote in Ukraine’s parliament in September 2021.

Zelenskyy vetoed the bill in October, arguing that the costs of establishing a new regulatory body to oversee crypto were too steep.

The bill signed by the president on Wednesday was an amended bill that addressed his concerns and was backed by a majority in the Verkhovna Rada – the Ukrainian parliament – in a new vote on February 17.

What does the law say?

The new law will lay the responsibility of regulating the new crypto assets market under the auspices of the National Commission on Securities and Stock Market.

It also outlines fines for violations and legal protections for investors from fraud.

In addition, the Ministry of Finance would be “actively working to amend the Tax and Civil Codes of Ukraine to fully launch the market for virtual assets,” the statement said.

Speaking at the time of the vote in February, Mykhailo Fedorov, Ukraine’s vice prime minister and digital transformation minister, called the new law an “opportunity for business development in our country”.

“Foreign and Ukrainian crypto companies will be able to operate legally, while Ukrainians will have convenient and secure access to the global market for virtual assets,” he said in a statement.

Crypto had been in legal limbo for some time in Ukraine, being neither legal nor forbidden due to a lack of legislation defining them and their usage. While buying and trading cryptocurrencies were permitted, there were no legal provisions to help those who fell victim to potential scams.

Crypto a lifeline for Ukraine’s war effort

Following the beginning of the Russian invasion of Ukraine, Zelenskyy’s government has actively encouraged donations in a range of cryptocurrencies to help fund weapons for the embattled Ukrainian armed forces.

In what is believed to be the first time crypto has been used in a war setting of this scale, sympathisers from around the world had flooded the Ukrainian government with an estimated $100 million (€90.9 million) in crypto donations at the time of publication.

Many of the coins received in the main wallet run by the Ukrainian crypto exchange Kuna.

On March 4, Alex Bornyakov, Deputy Minister of Digital Transformation, said that $15 million (€13.5 million) from the donations received at the time – which were mainly sent in Bitcoin and Ether – had been spent on non-lethal military equipment, including bulletproof vests.