Legal regulation of freedom of capital movement between Ukraine and the EU

Abstract

The purpose of the article is to analyse the legal regulation of the freedom of capital movement between Ukraine and the European Union (hereinafter referred to as the EU), and also to identify the key challenges and prospects in this area. The author analyses the provisions of the EU-Ukraine Association Agreement which enshrine Ukraine's obligations to ensure free movement of capital and payments. Particular attention is paid to the problem of implementation of EU law into Ukrainian legislation and the impact of martial law on capital movement liberalisation.

Methods. The author used, in particular, formal legal and dialectical methods in the context of studying the freedom of capital movement as a legal phenomenon and its interrelation with other legal phenomena, processes and institutions. The system-structural method and the method of system analysis to assess the effectiveness of the mechanisms of legal regulation of capital movement in Ukraine were also applied.

The results of the study show that Ukraine's legal obligations to the EU have a significant impact on the reform of national legislation in the field of capital movement. It is determined that the unprovoked and unjustified full-scale armed aggression of the Russian Federation has significantly slowed down the processes of currency liberalisation and financial integration, but the National Bank of Ukraine is implementing a phased strategy for easing currency restrictions in accordance with the Roadmap for the gradual removal of currency restrictions. The prospects for harmonisation of domestic legislation with Regulation (EU) 2023/1114 of the European Parliament and of the Council of 31 May 2023 on markets in crypto-assets, which is an important aspect of Ukraine’s future integration into the EU internal market, are investigated.

The conclusions focus on the need to improve the national regulatory framework, in particular with regard to the cryptocurrency market and taxation of virtual assets. It is recommended to ensure that Ukraine's legislative initiatives comply with the provisions of Regulation (EU) 2023/1114 of the European Parliament and of the Council of 31 May 2023 and to strengthen the institutional capacity of regulatory authorities for the effective implementation of the EU acquis on capital movements. It is noted that Ukraine's experience can serve as a unique example for countries which are simultaneously undergoing the process of European integration and are in crisis, since our country demonstrates a balance between currency stability (which is ensured by restrictions) and gradual financial liberalisation.