Ukrainian Bitcoin mine raided by police, central bank rethinks the legitimacy of digital currency

The recent raid on a Bitcoin mining farm located in a vacant state-run swimming pool has sparked questions in Ukraine about the legality of the cryptocurrency. Immediately following the raid, Ukraine’s central bank issued a statement on the regulation and legal status of Bitcoin.

Mine raided

Last week, Ukrainian police arrested several suspects for allegedly illegally mining Bitcoin, according to local media reports. In the Ukrainian capital of Kiev, an empty swimming pool in the recreation center of the state-owned enterprise Paton Welding Institute was used to mine the cryptocurrency with 200 computers.

After the arrests, the Svyatoshinsky District Court of Kyiv ruled that the bitcoins were illegally mined and that the suspects’ mining activities violated several provisions of Ukrainian law. Therefore, the court authorized the Security Service of Ukraine (SBU) to search and confiscate items and documents related to the mining operation.

The court ruled that the suspects had no right to use the swimming pool, which is located on a state-owned site, and that they had violated regulations of the Central Bank of Ukraine (NBU) - "issuing 'alternative currencies' and forging documents to launder money."

The legality of Bitcoin

The Central Bank of Ukraine stated that "there is only one national currency in Ukraine, the hryvnia. No other currencies or alternative currencies can be issued, nor can they be used as a means of payment." However, the law does not provide a detailed definition of "alternative currencies."

As early as 2014, the Central Bank of Ukraine had warned against Bitcoin and its applications. The central bank regarded this digital currency as a "currency substitute, which has no real value and cannot be used as a payment method by individuals and legal entities in Ukraine, as this violates Ukrainian law."

However, lawyers interviewed by local media all agree that cryptocurrency mining is not illegal in Ukraine. Artem Afyan, a partner at the Yuskutum law firm, said that “it is absolutely legal to engage in mining activities in Ukraine.” He added:

The central bank said that cryptocurrencies are an unsecured 'currency substitute' and this is just a warning they issued and does not mean that the central bank has banned their use.

Central bank response

A day after the arrests at the Kiev mining farm, the Central Bank of Ukraine released a statement reiterating that “the legal status of Bitcoin in Ukraine is currently unclear.” The central bank also pointed out that “the current status of Bitcoin in Ukraine is caused by the lack of definition and regulation of this digital currency in various countries around the world.” The central bank added:

In different countries, Bitcoin is classified into different categories - virtual currency, currency substitute, intangible asset value, virtual commodity, etc. At present, the Central Bank of Ukraine does not officially support any of the above definitions.

At the same time, the Central Bank of Ukraine has begun discussing the legal status of Bitcoin and the supervision of Bitcoin by relevant government departments such as the Ministry of Finance. The central bank said:

The issue of bitcoin regulation will be on the agenda at the next Financial Stability Board meeting, which is due to take place before the end of August.