Why are crypto firms leaving Ukraine?

The landscape of Ukraine’s cryptocurrency market is rapidly deteriorating, with Weld Money—the latest casualty—closing down its operations in the country. Users must withdraw their funds by the end of next month, or they risk losing access entirely.

The decision, communicated through social media channels, stems from military regulations under martial law and a lack of clear guidance regarding the operational framework for crypto firms.

Weld Money initially launched five years ago as a super-app for banking services and later joined forces with Unex Bank to introduce a card compatible with wallets on platforms like WhiteBIT and Huobi (now known as HTX). This card allowed customers to pay in USDT, USDC, BUSD or DAI at merchants that accepted Mastercard. However, the firm’s ability to provide services was increasingly hampered by military checkpoints and a surge in oversight.

Reports indicate that, as of March, customers were experiencing significant transaction delays, prompting complaints on the company’s Telegram channel. These interruptions adversely affected the fluidity of everyday transactions, which cardholders had come to expect from the service. The growing regulatory environment was further highlighted on May 27, when Weld Money posted on social media outlining the need for users to pull out their funds.

Compounding Weld Money’s challenges, Ukraine’s securities regulator proposed an increase in taxes on crypto income to 18%, alongside raising a defence surcharge from 1.5% to 5%. Furthermore, a critical legislative framework—”On Virtual Assets”—has been stalled, further threatening the prospects of companies eager to enter the space. Without clearly defined regulations, fintech companies have hesitated to launch new offerings, resulting in a notable contraction of the sector.

Weld Money’s closure mirrors patterns seen in other companies within Ukraine’s crypto ecosystem. Just this past January, local exchange Kuna announced it would cease trading. Subsequently, site operations were halted by the Economic Security Bureau due to tax evasion allegations. Additionally, as of May 20, wallet provider Trustee Plus ceased new user registrations, citing similar legal uncertainties.

The economic implications of the war have not only placed stress on existing firms but have also discouraged new entrants. Financial limitations and fresh restrictions on cash flows complicate budgeting efforts for nascent businesses. Many small companies find themselves incapable of managing operational costs, technology development, and compliance simultaneously.

Looking to the future, industry analysts suggest that the passage of the OVA bill might restore some optimism in the sector. Establishing clear guidelines surrounding profit taxation and military levies could reignite confidence among current and future investors. However, such changes might not be enough to retain larger, global firms equipped with robust compliance frameworks.

Despite ambitions to transform Ukraine into a blockchain hub, the current climate marked by uncertainty—a product of ongoing military tensions and regulatory challenges—may ultimately prove too daunting for local players. For now, customers must scramble to relocate their assets while abandoned desks in crypto firms serve as a reminder of the costs associated with volatility during wartime.