Ukranian bank suspends e-cash transfers, bolstering crypto use case


A Ukrainian serviceman holds a rocket-propelled grenade launcher (RPG) in fighting positions outside the city of Kharkiv, Ukraine, on February 24, 2022.

Maxim Levin | Reuters

Ukraine’s central bank is cracking down on digital money transfers in one of the latest measures implemented in connection with a nationwide declaration of martial law.

The National Bank of Ukraine tidy issuers of electronic money (e-money) to suspend the issuance of electronic money and the replenishment of electronic purses with electronic money. The written order also indicated that the distribution of electronic money was temporarily off limits.

The reference to electronic money probably refers to fiat currencies held in digital accounts through platforms such as Venmo or PayPal.

This is one of many new rules implemented by the country’s central bank as Russian forces lay siege to Ukraine.

The National Bank of Ukraine issued a statement on Thursday with a series of resolutions, including an order to suspend the foreign exchange market, limit cash withdrawals and ban the issuance of foreign currency from retail bank accounts.

As Ukraine cracks down on cash gateways and Moscow unleashes airstrikes and ground troops, some Ukrainians are turning to cryptocurrencies.

Kuna, a popular Ukrainian crypto exchange, shows that domestic buyers are paying a premium for Tether’s USDT stablecoin, which is pegged to the price of the US dollar.

“We don’t trust the government. We don’t trust the banking system. We don’t trust the local currency,” said Michael Chobanian, founder of Kuna, in an interview with Coindesk. “Most people have nothing else to choose from other than cryptocurrencies.”

Tether is the most popular stablecoin by market cap at nearly $80 billionand unlike cryptocurrencies like bitcoin and ethereal — who have experienced a a lot of volatility in recent weeks Amid rising geopolitical tensions, Tether, like other such stablecoins, is generally fairly stable in value.

However, at the current exchange rate, the price of 1 USDT is approximately 32 Ukrainian hryvnia (the national currency), or $1.10, thanks to increased demand.

For months, Ukrainian leaders have sought to rebrand themselves as the mecca of digital currencies.

Ukrainian President Volodymyr Zelenskyy signed a law in 2021 that paved the way for the country’s central bank to issue its own digital currency, and the president and parliament recently agreed on a law to legalize and regulate cryptocurrencies.

On an official state visit to the US in August 2021, Zelenskiy spoke of Ukraine’s nascent “innovative legal market for virtual assets” as a selling point for investment, and Digital Transformation Minister Mykhailo Fedorov said the country was modernizing its payments market so that its national bank could issue digital currency.

Before the Russian attack, Ukraine had plans to open the cryptocurrency market to companies and investors, according to the Kyiv Post. Top state officials have also been touting their crypto street credibility to investors and venture capital funds in Silicon Valley, but the Russian invasion has diverted attention from these efforts.