It is open season on Bitcoin just now in Ukraine.
The country’s law enforcement agencies have set their sights on the cryptocurrency industry, accusing its players of breaching laws that don’t even exist, or interpreting those that do in a way that benefits themselves.
Ukraine has no laws regulating cryptocurrencies, and thus mining, using and trading them is not forbidden, and therefore allowed by default. But the law enforcement can still find excuses to put pressure on the cryptocurrency industry.
The authorities have searched Bitcoin mining businesses and confiscated hardware, later citing vague national security concerns in a time of war with Russia. In particular, they have accused miners of financing terrorism in the Donbas using Bitcoins – something, given the anonymous nature of Bitcoin transactions, they can hardly prove.
Meanwhile, none of the companies that have been searched have been charged or fined. But none have had all of their seized equipment returned either.
And while Ukrainian representatives went to the World Economic Forum held in Davos, Switzerland to promote country’s tech sphere, and the cryptocurrency industry in particular, the harassment has continued.
Only on Feb.1, Ukraine’s SBU security seized 400 mining farms (computers set up together in racks to mine cryptocurrencies) worth $4 million at the Kvazar semiconductor plant. The SBU said the equipment was illegally brought from Russia to mine Bitcoins for Russian-backed separatists. They wouldn’t, however, explain why the “terrorists” had opted to conduct their illegal enterprise on Ukrainian soil, rather than safely in Russia.
The day before, on Jan. 31, border guards at Boryspil International Airport confiscated a one-ton batch of computers specifically designed to mine Bitcoins, called ASICs. The computers were together worth $500,000.
The reason for the seizure was that the sender had understated the value of the machines, the State Fiscal Service said.
But in such a case, according to the law, the service should have asked for the hardware to have passed through customs controls again, and if the price really had been in question, ask the sender to show documents proving the value give, or pay additional taxes. Only in the event of the owners failing to prove the value of the goods and refusing to pay the difference could the State Fiscal Service confiscate the goods.
Border guards can only confiscate goods immediately if they are banned for import, which ASICs are not.
Nevertheless the State Fiscal Service was unrepentant.
“The state budget could have lost millions of hryvnia,” it said later.
Meanwhile, Russian Anatoly Kaplan, the editor of ForkLog, one of the top publications on the cryptocurrency industry in Ukraine, is still waiting for $1.3 million in cryptocurrencies to be returned to him by the SBU.
The SBU accused Kaplan of money laundering and transferring funds to Russia using cryptocurrencies. However, the warrant for the initial search of his business stated a different reason: illegal forgery of U.S. bank cards and accepting payment in cryptocurrency.
The SBU arrived at Kaplan’s house with the warrant in December, and they seemed to know exactly what they were doing, immediately transferring $800,000 in cryptocurrencies from Kaplan’s computers to their own cryptocurrency wallets.
And that’s not the first time law enforcement has given one reason for conducting a search, but then given another once the search is done.
In summer 2017, Ukraine’s National Police arrested several suspects who were producing Bitcoins at a recreation center at the Paton State Electric Welding Institute. The police found that 200 computers had been set up in an unused swimming pool in the institute’s recreation center to generate bitcoins.
The main justification for the arrests given by the court under the warrant was that the miners had breached the Law on the National Bank of Ukraine by “emitting substitute money.” The law referred to by the court does not specify what “substitute money” actually is, however.
Here is the heart of the problem – legal uncertainty concerning cryptocurrencies.
The government has to pay attention to this matter, and soon, to stop abuses by law enforcement, and regulate the emerging cryptocurrency market – for the good of miners, traders, and investors.
The longer this uncertainty goes on, the more people could fall afoul of the law, even for doing nothing illegal. The thousands of people who mine virtual money in Ukraine should either know they are protected by the law, or seriously consider whether it’s worth the risk doing this kind of business here.
The Kyiv Post’s IT coverage is sponsored by Ciklum. The content is independent of the donors.
