The National Bank of Ukraine opposes cryptocurrency hryvnia and digitalization of cash

The National Bank of Ukraine (NBU) opposed the abandonment of cash for the sake of total digitalization of the economy. This was reported by Ekonomichna Pravda with reference to the NBU’s commentary. According to the NBU, it is impossible to abandon cash today, given the martial law.

The NBU noted that under the current conditions, Ukrainian citizens should have access to cash forms of payment. «In today’s environment, citizens must have access to cash to be able to meet their basic needs even in the event of possible critical events (blackouts, military operations, etc.),» the NBU said. The financial regulator also noted that there is no single answer to the question of the need to issue electronic hryvnia (e-hryvnia).

«It should be added that the decision on the feasibility of a large-scale issue of e-hryvnia in Ukraine has not been made yet,» the NBU said. Currently, the regulator is testing the technological basis for issuing electronic money, as well as analyzing the potential consequences of the e-hryvnia issue for the country’s financial stability. Details of the testing are not disclosed.

The NBU has been testing the electronic hryvnia since 2018. «However, back then, as part of the pilot project, only 5443 e-hryvnias were put into circulation, which were used by the NBU employees to pay for several hundred test transactions,» Economichna Pravda journalists noted. The NBU is expected to make a decision on the electronic hryvnia by the end of the first quarter of 2025.

It should be noted that cryptocurrencies may be legalized in Ukraine as early as September 2023. According to the draft law, Ukrainian citizens will have to pay 18% of investment income and a 1.5% military tax. The bill could come into force as early as 2024 if the Verkhovna Rada passes it in September 2023.

Virtual assets will be divided into three types: electronic money, asset-linked tokens, and other cryptocurrencies. To issue tokens, a legal entity will need approval from the National Securities and Stock Market Commission (NSSMC). For authorization, a legal entity must issue a white paper.

Regarding the regulation of cryptocurrencies in Ukraine, the ideal formula consists of a balance of the interests of society and the state. According to the NSSMC experts, excessively strict «rules of the game» may negatively affect the development of the virtual asset market and blockchain technologies. On the other hand, broad «self-regulation» of the market can cause significant damage to investors whose assets must be protected.