Ukraine’s national bank mulling over launch of state-owned digital currency

The National Bank of Ukraine (NBU) is currently engaged in developing a state-owned digital currency ‘electronic hryvnia’ based on blockchain, local media outlet Vesti reports.

As per the report, Ukraine’s central bank says that the blockchain-based hryvnia has to be centralized and be under government’s control.

Another goal that the NBU plans to achieve by the issuance of the electronic money is to reduce the amount of cash in circulation because their issuance and maintenance become very expensive for the state.

“We are studying how an electronic hryvnia can complement Ukraine’s payment landscape and contribute to increasing the share of non-cash payments and reducing their cost,” said one of the representatives of the National Bank to Vesti.

This is not the first time Ukraine’s state officials are trying to navigate the world of blockchain. They have already started using blockchain for the registry of property rights.

Advisor to the head of the Association of Ukrainian Banks, Alexei Kushch is optimistic about this idea. He says:

“Many central banks are developing similar national currencies. Now the currency circulation in Ukraine functions in two spheres: it is cash and non-cash that is accounts in banks. And with the help of Blockchain technology, you can start the third form – digital. Digital money will also be on bank accounts but will be recorded on an electronic wallet. At the same time, due to the Blockchain technology, money will be protected from fraud, hacker attacks, and illegal withdrawal.”

According to bank officials, this version of a Ukrainian state-backed coin would have to be tied to the national fiat currency at a rate of 1:1. According to the NBU, this would prevent the growth of the inflation rate.

However, the bank is not yet sure about the launch date of the digital currency. The bank said:

“The decision on the appropriateness of the introduction of electronic hryvnia in full will be taken only after a detailed analysis.”

Not the first tryst with blockchain and cryptocurrency

As reported by BC Focus earlier this month, Ukraine’s parliament the Verkhovna Rada, proposed a bill that would tax operations related to crypto assets. The tax bill stated that a 5 percent tax would be levied on individuals and other entities conducting business using digital currencies. The above tax rate is applicable for a period of six years.

Commencing on January 1, 2024, assets that come under the realm of “cryptocurrency” would qualify for an 18 percent tax rate, which equals the basic rate for corporate and personal income tax in Ukraine.

Cryptocurrencies don’t come under any legal purview in Ukraine currently. However, discourse regarding the topic has been ongoing since late last year. Cabinet ministers on the Financial Stability Board, under the Ukrainian Parliament, assembled in September last year to discuss what legal purview would Bitcoin and other virtual currencies fall under.

See Also: Digital currency tax bill tabled before the Ukrainian Parliament

Cryptocurrency to possibly get legalized as a financial asset in Ukraine

Image via Shutterstock

Join our Telegram group