Ukraine Won’t Regulate Crypto Mining, Government Ministry Says

In a document published on Friday, the government branch responsible for the digitization of Ukraine’s economy listed the main principles of the country’s approach to the crypto assets.

Ukraine’s Ministry of Digital Transformation has indicated it won’t be creating regulations for the crypto mining sector.

The main goals for the government in the field should be “formation and implementation of state policy in the field of digitization, digital economy, digital innovation, e-governance and e-democracy, development of information society; assuring the development of virtual assets, blockchain and tokenization, artificial intelligence,” the document reads.

Most notably, the ministry said it has no plans to bring in rules to regulate crypto mining as that industry is already self-governed by blockchain consensus rules.

“We remain loyal to mining activities that form part of open decentralized networks. Mining does not require regulatory activity from governmental oversight bodies or other third-party regulations, this activity is regulated by the protocol itself and network members,” the manifesto states.

The ministry will also “contribute to the development and market introduction” of distributed ledgers, support “any innovation using these digital technologies, even if they are partially unregulated and/or not defined by national law” and create regulatory sandboxes for the blockchain industry.

The government will further seek to adopt the world’s best practices when it comes to taxing cryptocurrency-related income. A draft bill on taxation was submitted to the country’s parliament, the Verkhovna Rada, in November.

In addition, the manifesto says, Ukraine aims to facilitate the interaction between the traditional finance and crypto markets and prevent misconduct by service providers and law enforcement agencies.

With pressure from external agencies, however, the head of the Ministry of Finance, Oksana Makarova, said late in January the nation’s financial watchdog intends to track crypto transactions exceeding $1,200 USD. The move was to align Ukraine’s anti-money laundering practices with the latest Financial Action Task Force recommendations around cryptocurrency transactions, Makarova said.

Ukrainian Railways Branch Caught Mining Crypto With State Power

In the latest instance of state employees mining cryptos at work, a unit of Ukrainian Railways (Ukrzaliznytsia) has been caught red-handed diverting company electricity to earn bitcoin.

State-owned Ukrzaliznytsia said in an announcement on Friday that its security department and law enforcement officials had discovered that branch employees in the western city of Lviv had secretly been running a bitcoin mining farm, costing the state over $40,000 in power. Oleg Nazaruk, director of the railway’s Department of Economic and Information Security had apparently reported the finding.

“During the inspection of the premises where the so-called farm was located, more than 100 pieces of computer equipment were identified that were generating bitcoins. The aforementioned equipment was connected to the Ukrzaliznytsia power grid. The estimated amount of losses since the beginning of the year is UAH 1 million $41,332”, Nazaruk said.

Creating and and circulating cryptocurrency is prohibited in Ukraine under central bank rules, Ukrzaliznytsia said.

The nation has been working on bringing in comprehensive cryptocurrency regulation for several years, a legislative effort that seems to be at last moving more rapidly. Most recently, crypto exchange Binance was said to be assisting Ukraine with developing rules for the industry.

A criminal case has now been launched over the illicit Lviv mining effort and evidence from the branch has been sent to police, Ukrzaliznytsia said.

The temptation to use company power or equipment to make easy money mining cryptocurrency is one that state employees seem to struggle to fight.

Last year, several scientists working at a Russian nuclear weapons research facility were arrested for mining cryptocurrencies onsite.  Ukraine’s top law-enforcement and counterintelligence agency also found mining equipment at a nuclear power plant this August. Elsewhere, Florida state employees, Chinese teachers and Australian government contractors have all got into hot water over their secret mining efforts.

Ukraine Justice System Employee Caught Mining Crypto at Work

An IT staffer at Ukraine’s State Judicial Administration has been charged with illegally mining cryptocurrency at his workplace.

The prosecutor’s office of Kyiv reported Wednesday on its Facebook page that, together other agencies, it has completed an investigation into the employee who worked in the data systems division of the court administration department.

The unnamed individual is said to have taken advantage of the equipment and internet bandwidth allocated for Ukraine’s court documents database and the Judiciary web portal to mine cryptocurrency from January to May 2018. He is additionally alleged to have used workplace servers to host external websites, including three online stores and a website for motorcycle fans, the prosecutors office said.

The employee has been charged with illegal intervention in the work of computers and computer networks, and in the distribution of harmful software. According to Ukraine’s criminal code, if found guilty he faces up to 6 years in prison and a ban on working in government agencies.

The news follow a handful of other cases of illegal mining by government employees in the country. Last November, Ukraine’s railway administration (Ukrzaliznytsia) caught employees mining crypto using the company’s power capacity in the city of Lviv. And in August, law enforcement uncovered an illicit crypto mining facility at the South Ukraine Nuclear Power Plant.

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