Ukraine considers state-backed digital currency
Following the footsteps of other countries dropping paper, gold-backed money in favor of digital and cryptocurrencies, Ukraine’s central bank is working on the development of e-hryvnia, the digital equivalent of the country’s national currency, hryvnia.
The extensive pilot has been in place since December 2018. One of the issues the Ukrainian government is looking to tackle with e-hryvnia is an increased use of cash payments nationwide.
Notably, the country still has not finalized its own cryptocurrency legislation. According to Mikhail Vidyakin, the director of the strategy and reform department of the National Bank of Ukraine (NBU), there are “too many institutions in the country that have the authority to regulate cryptocurrencies.” In another regulatory development, in September 2018 the Ukrainian parliament has released a draft of the tax bill related to crypto. According to the proposed taxation policy, there would be a 5% percent tax for all individuals and businesses conducting crypto-related business, and also 18% profit tax for businesses, starting from January 1, 2024.
While the e-hryvnia development is certainly an exciting step towards mass adoption of digital currencies, Ukraine’s authorities stay cautious and do not identify it as a “cryptocurrency” yet, due to its centralized nature.
“We are not talking about cryptocurrency, we are talking about a central bank digital currency. It can be implemented with both the technology of a centralized registry and a decentralized one,”
said Aleksandr Yablunivskiy, NBU’s head of payment networks and innovative growth department.
According to Yablunivskiy, during the e-hryvnia practical pilot, the digital currency was released to NBU employees for the purpose to access its practical use aspects, and also the ability of the central bank to realize future projects, along with getting feedback from users.
The central bank is now evaluating the results along with the feedback from the pilot and will consider its next move based on the pilot outcomes, Yablunivskiy stated. If e-hryvnia to be approved by the Ukrainian government, it will officially become the first government-issued digital currency in Eastern Europe. Such a move will develop more regulatory clarify for digital and cryptocurrencies and fuel their adoption in the region, experts say.