Ukraine shall become global “IT and crypto-offshore”

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Andrey Kolodyuk - Founder and Managing Partner of AVentures Capital, Chairman of UVCA Supervisory Board
Андрей Колодюк

Ukraine is the only world’s country that managed to create 100% private IT field. This is because the state steered almost clear of this process. Now we have the chance to become the global platform in the field of ICO and blockchain. The only thing that shall be done by the state is not to bother. The market will regulate itself.

De jure, all the Ukrainian business is in the offshore zones. According to various estimates, up to 75% of Ukrainian export is crossing over through offshore companies. $5 bln. is siphoned off every year through offshore jurisdictions.

Startups are no exception – on frequent occasions they are incorporated outside the territory Ukraine, but for some other reasons. If company is aimed at global market, then it has nothing to do, but to open its sales offices across the globe and to be registered there. Or, this shall be done in core target markets, at least. Thus, the companies, whose major customers are located is the States – legal entities in the USA – is the only condition for them to handle selling there.

This is the distinctive feature not for the Ukrainian startups only. Offshore scheme provides business with an opportunity to pay less taxes by legal means. On the other hand, offshore gets extra revenues. But how Ukraine, whose companies are currently being registered in offshore zones, may “make profit” of this situation? For many consecutive years I stand for the idea as follows: we shall stop blaming offshores and shall become IT-offshore. As soon as this is done, we will raise investments. Let’s get a view of Cyprus, for instance. In these latter days, it is making concentrated efforts to attract IT-business, and we could compete with it.

Just a very short while ago, everyone was discussing the innovations introdused by Belarus. Upon completion of ten-year long experiment with the Innovation Park, one decree was adopted in the country. This decree makes Belarus IT and crypto-offshore in the public eye. This initiative may become a magnet that will boost the inflow of investments. However, this is also a threat for the CIS market (Ukraine, Russia, etc.): some business entities may move to Belarus in search for more comfortable conditions, since it is much more easier and simpler compared to Cyprus or the USA. I will repeat myself and say that this will be a major threat for us when business departs from Ukraine. Our only remedy is to create similar competitive conditions in the short run.

We have been working for a long time to turn Ukraine into “global IT/crypto offshore” favorable for global IT companies operation not only de jure, but de facto as well.

Some time ago our Ukrainian Venture Capital and Private Equity Association (UVCA) has established Blockchain Committee, whose goal is very simple: for the ICO to be performed in Ukraine as the investment raising tool. We work with the government, with the Cabinet of Ministers, for instance. We show the opportunities and arrive at a consensus. Those, who work in top corner offices, already know what bitcoin stands for. But we shall switch from perception to market evolution conditions arrangement.

What conditions we are talking about. We need no special legislation for ICO or benefits for blockchain-projects implementation. From a legal perspective, the coast is clear for the ICO to be conducted in Ukraine. I believe that Ukraine will soon make its first transaction. For Ukraine to become “Cyprus for ICO-projects”, the state shall conduct hands-off policy and shall let the market regulate itself – by efforts of the community and such industrial groups as UVCA Committee, Bitcoin Foundation, etc.

Therefore, our message to the state is very simple: it just so happened, that you did not help IT guys and now this is the third branch of Ukrainian economy. Therefore, at the very least, please stay out of the way of further development (though, nevertheless we’d really appreciate if someone helps us).

Ukraine is the only country that managed to create 100% private IT field. I’m saying this all over the earth, and, I’d go as far as saying, this blows the mind. The state shares the same message too from its own part. When the Minister of Economic Affairs declares that IT is the third our field as to the export, everyone understands that this is true. All the member state of the European Union, Israel, Silicon Valley – their IT field was initiated and supported using the state funds, taxpayers’ funds.

I will tell how does the self-regulation occurs, using UVCA as an example. We do not accept to our Association anyone who feels like it. If investor having high money but ill fame comes to us, we give him a cold shoulder. In precisely this way the self-regulation works: it chops off those, who may do damage to ecosystem and to the market. Every investor has both “black list” of startups that will never be invested by him for some reason or another and the list of investors, not suitable for syndications.

Other regulation may take place under existing laws. This is a normal practice. If someone has stolen something from you via ICO, then general legislation will sort this out.

We promote Ukraine abroad as a new technology partner. We are talking about the economics and about the new place of Ukraine in the global capital allocation. “Ukraine is your partner, and that’s why…”. We do not fooling around with a begging bowl, just the other way round – we show our personal example. Portfolio of our AVentures Capital has 12 companies. Almost all of them, except for us, have international investors, who were taken on not without our contribution. We invest by ourselves and invite others to do so. Personal example is the best signal for international investors.

During the World Economic Forum, which will traditionally take place in January in Davos, we will organize Ukrainian House for the first time. As I mentioned before, its goal is to represent Ukraine as a new technology partner. Our broad topic: “Ukraine: creativity, innovations, opportunities” we will show the investment opportunities in Ukrainian IT to the worldwide leaders of business, technology, and investments.

We hold nearly 10 various events in Davos to tell as much as it is possible about the opportunities in Ukraine, such as investment panel discussion, AgroTech panel discussion, “Kyiv city as a global Tech Hub” panel discussion, etc. Ukrainian House shall become the unique place for bilateral meetings of startups and world-class venture capital persons from across the world.

Moreover, we separate panel discussions dedicated to ICO and crypto currencies “Where is crypto-harbor’s future” and “Is Blockchain safe enough to become the Internet 2.0”. We want to present Ukraine as the place for ICO conduction and to explain the distinguishing features of regulation and non regulation of this field in Ukraine. “Ukraine is the place where ICO of global company may be made,” – this is our message to the whole world, and it would be nice if the state could be the bearer of this idea on the world stage.

Ukrainian House will become the chance of a lifetime to show vivid and dynamic European country – Ukraine, and to show people, who live in it and create global innovative companies.

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