Virtual currency as an object of financial monitoring: taking into account the experience of foreign countriesin the formation of national legislation
Authors: Perepelytsya Maria 
Published: June 2021

Problem setting. On April 28, 2020, the Law of Ukraine “On Prevention and Counteraction to Legalization (Laundering) of Proceeds from Crime, Financing of Terrorism and Financing of the Proliferation of Weapons of Mass Destruction” came into force, which expands the range of state financial monitoring entities a new category of subjects of primary financial monitoring – providers of services, related to the circulation of virtual assets. The space of virtual currencies has expanded to include a number of new products and services, activities and interactions. In turn, the rapid development, growing recognition and global nature of products and services based on virtual currency have increased the risks of using such a financial asset to legalize illicit income. Contributing to this fact that payment products and services based on virtual currency do not recognize borders and transactions with them can be carried out without any apparent link to a particular jurisdiction. Therefore, the financial system of any state can be used to legalize (launder) proceeds of crime. This issue is extremely important for Ukraine, because the state of this problem is at a low level, and the issue of its solution is only being raised.

The purpose of the research. Research of the approaches that some countries are currently using, and some are going to apply in the near future, in the field of regulation of payment products and services based on virtual currency as an object of financial monitoring in order to take them into account when developing national legislation in this area.

Analysis of resent researches and publications. The problem of virtual currency as a new means of payment, its functionality and types were studied in the works of domestic scientists – M. Kucheryavenko, A. Kud, E. Smychok, A. Ovcharenko, O. Glushchenko, S. Khvalinsky and foreign – Fredrik Schneider, E. Gots. But the author of the article draws attention to a separate aspect of this problem - the legal uncertainty and unregulated implementation of transactions with virtual currency in legal relations in the field of financial monitoring.

Article’s main body. Having analyzed the experience of foreign countries in the formation of national legislation, we consider it possible to offer the following recommendations for regulating financial monitoring, where the object is virtual currency: 1) registration in a special body of service providers related to virtual assets, both national and foreign origin; 2) conducting activities by the national financial monitoring service (seminars, lectures, webinars, issue of reports, collections of cases, etc.) on illegal use of crypto-assets, both among the subjects of primary financial monitoring and among individuals and legal entities whose activities are not associated with virtual currency in order to eliminate financial illiteracy; 3) licensing of activities; 4) creation of a separate department in the structure of the financial monitoring service for supervision and control of providers of services in the field of virtual currency, which would evaluate programs, business plans of such providers in order to prevent neutralization of risks in the field of virtual assets, combating money laundering; 5) the obligation directly to the providers of virtual services to periodically provide reports on the risks that exist in their activities; 6) differentiation of services with virtual assets depending on the subject or object of the service itself: services in the field of money transfer, services in the field of securities, services in the field of exchange goods and derivatives and development of typology and risk indicators for each area ; 7) establishing close cooperation between state national authorities on the exchange of any information related to the implementation of activities in the field of virtual currency.

Conclusions. The article, based on a study of the approaches used by some countries in the field of regulation of payment products and services based on virtual currency as an object of financial monitoring, provides suggestions for their application in national legislation. The experience of regulatory supervision over the use of virtual currencies in the field of financial monitoring is studied on the example of Italy, USA, Norway, Japan, Sweden, Mexico, Finland and the most effective measures are singled out. The focus is on the cross-border nature of virtual currency transactions as an object of financial monitoring and ways to track them.