Crypto Tax Evasion Costs Ukraine $200M

Transactions made through hardware wallets were omitted from the report as they lie beyond the scope of the study. DeFi platforms, known for their anonymity, were also excluded due to the difficulty of identifying users. 

Tax Gap Analysis — Missed Revenues from Crypto Transactions  

Between 2020 and 2024, centralized exchanges (CEX) accrued $1.12 billion in revenue from Ukrainian crypto traders, reports Global Ledger. This translated to a $202 million shortfall in potential tax collections over four years. The yearly breakdown reveals $57 million for 2021, $43 million for 2022, $40 million for 2023, and $62 million for 2024.

In response to the Ministry of Digital Transformation’s inquiry, analysts evaluated potential income under several tax models. Their findings revealed that a 10% tax on crypto earnings could have netted the Ukrainian treasury $320 million in 2024.

The study reviewed data from 13 major mining pools, including Foundry USA, AntPool, F2Pool, and ViaBTC, concluding that Ukraine contributes about 1% of the global hash rate. From 2021 to 2024, mining activities in Ukraine generated an estimated $113.15 million.

The report does not specify if mining pools in Russian-occupied territories like Donetsk, Luhansk, and Crimea were included. These regions are known to house operations tied to Russia’s “shadow mining empire.”

Global Hurdles in Cryptocurrency Taxation   

As the crypto market swells to $3.75 trillion in capitalization, governments worldwide are under pressure to establish coherent frameworks for regulating and taxing digital assets. This monumental task highlights the disparity in national approaches.

The Czech Republic has embraced a pragmatic solution, taxing cryptocurrencies as traditional financial instruments such as stocks, making compliance more straightforward. Conversely, South Korea has delayed enacting new tax regulations due to unresolved complexities and legal ambiguities.

Governments often encounter resistance from the crypto community when implementing tax policies. In India, disputes over the taxation framework reached the Income Tax Appellate Tribunal, which ruled that digital assets should be treated as capital assets. This classification subjected them to lower capital gains taxes rather than higher income tax rates. A comparable scenario is unfolding in Kenya, where traders have taken proposed tax rules to court.

Ukraine is advancing its efforts to bring digital assets into the legal fold, aiming for full sector legalization by early 2025. The Global Ledger report seems to be a step in the government’s broader strategy to enact comprehensive cryptocurrency laws.

Key stakeholders, including a parliamentary team, the National Bank of Ukraine, and the IMF, are drafting a legislative framework designed to establish clear rules for taxation and market governance. These efforts aim to attract investors, support industry growth, and reduce illegal activities such as money laundering within the crypto space.