The National Bank of Ukraine recognizes the benefits of supporting crypto innovation but fears that cryptocurrencies could become the basis for national activity. Announcing its monetary policy guidelines for the near future, the regulator noted that it was going to protect the status of the hryvnia as the only legal tender in the country.
Bank of Ukraine will not allow freight money to replace crypto
Under the current administration in Kiev, Ukraine has taken steps to control its expanded crypto space. Earlier this month, Ukraine’s parliament passed a law on “virtual assets” that legalizes crypto-related activities and is now working on tax reform related to cryptocurrency transactions. President Volodymyr Zelensky designated the crypto market as the “development vector” of the nation’s digital economy.
Against this background, the National Bank of Ukraine (NBU) acknowledges that innovations associated with virtual assets, or cryptocurrencies, can improve Ukrainians’ access to financial services while increasing competition among market participants, and also bring investment to Eastern European countries. Regulators help facilitate the growth of the new digital currency industry.
At the same time, the central bank, looking at some of the risks involved in cryptocurrency, has recently published its “Fundamental Monetary Policy for 2022 and the Medium-Term Perspective”. According to documents cited by Forklog, the spread of decentralized funds could stimulate the flow of funds from bank deposits to digital assets, jeopardize financial stability and increase the loopholes of financial oversight.
After all, the NBU fears that the cryptocurrency could potentially replace the national fiat money, the Ukrainian hryvnia, leading to the “emergence of parallel financial transactions.” To limit these risks, the authorities want to prevent any restrictions on the use of the hryvnia as an exclusive legal tender in Ukraine, as it is also preparing to issue a digital version of the sovereign currency.
Noting that cryptocurrency currently has no significant impact on government monetary policy and financial stability, the National Bank of Ukraine acknowledges that it may change in the future. With technological advances and market expansion, growing awareness and investor interest, “the spread of virtual assets could increase significantly, and their price volatility could decrease,” the central bank concluded.
In an interview in August, Deputy Minister of Digital Transformation Alexander Berniakov promised that Ukrainians would be able to keep, trade and spend cryptocurrencies. Government officials have noted that although the new law does not allow them to be used as a means of payment, payments will be legalized by instant conversion to crypto with hryvnia. Berniakov added that he would see a whole new market for intermediary services that would allow digital coins to be used for storage, exchange and payment.
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