Legalization of electronic money in Ukraine: new rules of the financial age

In today's world, digitalization has reached all sectors of the economy, and the financial sector is no exception. Electronic money is no longer futurism, but a reality that forms the new financial infrastructure of the state. Ukraine, which seeks to integrate into the European market, is actively developing legal mechanisms to regulate the circulation of electronic money. In this article, we will analyze, What does the legalization of electronic money mean?What changes have been made to the legislation, who can issue them, and how this will affect businesses and citizens.

1. What is electronic money?

According to Law of Ukraine "On Payment Services" No. 1591-IXelectronic money is the monetary value stored in electronic form is accepted as a means of payment by persons other than the issuerand is the obligation of this issuer to repay them.

Simply put, electronic money is analog of cash or funds on the accountbut in a digital format. They allow you to make payments, purchases, and transfers without using paper money or bank cards.

2. 2. Evolution of legal regulation

Until 2022, electronic money existed in Ukraine, but The legal framework was outdated. Regulation was carried out mainly at the level of NBU regulations, without a systemic law, which created legal uncertainty.

The situation changed after the adoption of the of the Law "On Payment Services"which came into force in 2022. He:

• recognized electronic money a full-fledged payment instrument;

• determined the order issue, circulation and redemption;

• allowed not only banks, but also other financial institutions and non-bank payment service providers to be issuers;

• created the conditions for Ukraine's integration into the European financial area (PSD2, E-Money Directive).

3. Who can issue electronic money

Currently, they have the right to issue electronic money:

1. Banksthat have received the appropriate license from the NBU.

2. Non-bank financial institutionsthat have passed the authorization procedure.

3. Fintech companiesthat meet the requirements for payment institutions.

The issuer shall:

• provide full coverage of electronic money with real funds on separate bank accounts;

• lead transaction accounting and guarantee the possibility of exchanging electronic money for fiat currency;

• mother transparent ownership structure, personal data protection and cybersecurity system.

4. How electronic money is circulated

Electronic money circulation includes the following stages:

1. User buys electronic money from the issuer (usually via bank transfer or card).

2. The issuer stores them on an electronic account user.

3. The user can make payments or transfers other persons accepting electronic money of this issuer.

4. At any time, the user has the right to repay electronic money and receive the cash equivalent in hryvnia.

To account for such transactions, the following are created electronic wallets - special accounts in the issuer's information system.

5. Tax aspects of using electronic money

Today, electronic money is equated to cashless paymentsTherefore, transactions with them are subject to general tax rules:

• Income tax payers account for the movement of electronic money as financial transactions.

• Individual entrepreneurs on the simplified taxation system can accept electronic money if it is provided for in the agreement with the payment service.

• Application. Cash registers or PRS in electronic money payments is mandatory in cases where it is required by law (in particular, when selling goods/services online).

6. Advantages of legalizing electronic money

The legalization of electronic money has opened up a number of opportunities for the economy:

1. Convenience for business - fast payments without intermediaries, reduced bank account maintenance costs.

2. Financial inclusion - access to payment services for people who do not have bank cards.

3. Transparency - all transactions are recorded in the system, which reduces the risk of money laundering.

4. Integration with international platforms - creates conditions for the development of e-commerce and IT business.

5. Security. - use of the customer identification system (KYC) and anti-money laundering (AML).

7. 7. Risks and challenges

Along with its benefits, legalization of electronic money poses a number of challenges:

• Cyber threats - The need to protect payment data from attacks is growing.

• Control and reporting - requirements for issuers and users in the framework of financial monitoring are being tightened.

• Tax burden - The government is committed to eliminating shadow transactions.

• Risk of market monopolization large banks or international payment systems.

8. 8. International context

Ukraine is moving towards European model of regulation, similar to the directive EU E-Money Directive (2009/110/EC). This opens up the possibility for mutual recognition of electronic walletsas well as for the participation of Ukrainian fintech companies in the European market.

In addition, the legislation provides a framework for introduction of the digital hryvnia (e₴) - a state electronic asset that can become part of Ukraine's monetary system.

9. Business prospects

For Ukrainian entrepreneurs, legalization of electronic money means new opportunities:

• accept payments without bank fees;

• expand sales in the online segment;

• implement internal corporate settlements between employees or partners;

• participate in international payment platforms.

It is important for legal entities to update internal financial control policiesto meet the requirements of financial monitoring, KYC and AML.

10. Conclusion.

Legalization of electronic money is Ukraine's next step towards the digital economywhich opens up new horizons for business, simplifies financial transactions and increases the transparency of payments.

At the same time, the use of such tools requires clear legal and tax awareness. Professional legal support will help companies to properly formalize transactions, get authorization from the NBU, prepare internal policies and avoid financial monitoring risks.

Ukraine is taking a decisive step towards of the digital financial futurewhere electronic money is becoming an integral part of the economy, and its legalization is a guarantee of stability and transparency of financial processes.