Home Digital Currencies Ukraine central bank publishes ‘draft concept’ of digital currency

Ukraine central bank publishes ‘draft concept’ of digital currency

Ukraine: the NBU is progressing its research into a ‘convenient and accessible’ CBDC | Credit: Nadine; Pixabay

The National Bank of Ukraine (NBU) has presented the ‘draft concept’ of an e-hryvnia as it progresses its explorations of a potential central bank digital currency (CBDC) amid the country’s war with Russia.

The central bank has sought feedback on a possible CBDC design, as well as its overarching CBDC thinking, from banks, non-banking financial institutions and the digital assets market after launching an in-depth research project to determine the feasibility of ‘large-scale’ issuance of an e-hryvnia in September 2021 – five months before Russian troops started to pour across the country’s border.

“The development and implementation of the e-hryvnia can be the next step in the evolution of Ukraine’s payment infrastructure, contribute to the digitalisation of the economy, further the spread of non-cash payments, increase [payments] transparency and confidence in the national currency as a whole,” said NBU deputy governor Oleksii Shaban in a CBDC update (Ukrainian language) released by the central bank.

A CBDC could “have a positive impact on ensuring economic security and strengthening the monetary sovereignty of the state, strengthen the ability of the National Bank to maintain price and financial stability as a guarantee of sustainable economic growth,” Shaban said.

The update comes as the war’s death-toll on both sides of the conflict, as well as the physical damage from Russia’s ongoing attacks on Ukraine’s infrastructure and the cost of post-war rebuilding, continues to mount.

Three CBDC applications

The NBU has presented to the private sector the ‘architecture, characteristics and advantages for payment service providers’ of a potential e-hryvnia, illustrating how it could create opportunities for the emergence of new business cases, digitalisation of services and attracting new customers, according to the NBU’s update.

Use of a potential Ukrainian CBDC should be ‘convenient and accessible’ to all segments of the population, legal entities, government agencies, banks and non-bank financial institutions.

The central bank is, the update goes on to state, ‘considering and working on’ three CBDC applications: an e-hryvnia useable for retail payments, potentially imbued with programmable money functionality to enable targeted social payments and a ‘reduction of public spending on administration’; a CBDC becoming ‘one of the key elements of high-quality infrastructure development’ for the virtual asset market (crypto assets); and helping to make cross-border payments ‘faster, cheaper and more transparent’.

The Ukrainian Intellectual Property Institute registered the trademarks ‘е-гривня’ and its English-language translation (‘e-hryvnia’), in the name of the central bank, in October, the update notes.

The central bank is now continuing to develop a ‘draft concept’ alongside payment market participants, virtual asset market participants and government agencies, it adds.

Legal foundations: done

The NBU has been researching the possibility of launching a CBDC since 2017 and, in July last year, issued a 20-page publication (Ukrainian language) containing the results of a survey of financial market specialists on the potential demand for a CBDC in Ukraine, as well as a summary of global experience in developing CBDCs and its own research.

Ukraine’s Parliament registered a draft law on payment services (‘Проект Закону про платіжні послуги’) in November 2020 that included a definition of CBDC and empowered the NBU to issue a digital currency, if a decision is made to do so. The law was adopted by Parliament in June 2021 and signed off by president Volodymyr Zelensky in July 2021.

It is also almost two years since Ukraine’s government announced a partnership with the Stellar Development Foundation to assist with its digital money strategy and infrastructure. The Ministry of Digital Transformation, which was established in 2019, signed a memorandum of understanding with the US-headquartered non-profit organisation – which supports the development and growth of Stellar, an open-source cross-currency transaction system and platform for digital asset issuance – to ‘develop virtual assets and to facilitate central bank digital currency (CBDC) infrastructure’.

The NBU’s Shaban and Ukraine’s then-minister of social policy, Maryna Lazebna, described during an event in May (to launch a European Union-supported ‘Fintech Challenge for Ukraine’ hackathon) how digital technology was helping during the war. Shaban highlighted the resilience of the banking system, saying “this may sound like a miracle, but the Ukrainian banking system is operating in a ‘business-as-usual’ mode” and that “digital banking infrastructure continues to work smoothly.” Lazebna, meanwhile, said that the government’s progress at digitising welfare payments prior to Russia’s invasion had stood the country in good stead given the challenge of distributing payments by non-digital means. She also highlighted how digital money transfers had enabled people worldwide to send money to Ukrainians.

Fintech champion’s post-war ambition

The chairman of the Ukrainian Association of Fintech and Innovation Companies (UAFIC) has expressed hope that fintech companies from his country “will change the world” after the war.

Rostyslav Dyuk delivered a keynote address during the inaugural Global Government Fintech Lab – which brought together senior public servants exploring the opportunities created by fintech – on 1 June in Estonia.

“It’s impossible to be ready for a war. Ukraine is now heard all over the world but unfortunately the reason for this is very sad,” Dyuk said via a video broadcast from Ukraine’s capital Kyiv.

There were about 100 Ukrainian fintech companies in existence in 2018, a number that had more than doubled by 2021. “In the past four years Ukraine has developed a healthy fintech ecosystem and I hope that, after the war, Ukrainian fintechs will change the world,” Dyuk told the event audience.

Fintech had the potential to “transform” the economy by improving productivity and helping to “secure more and better-paid” jobs, Dyuk said. But he acknowledged that it would take “years” to rebuild the country.


‘Ukraine fintech hackathon won by NFT solution to restore cultural heritage’ – news story (1 July 2022) on a fintech-based solution that aims to restore Ukraine’s cultural monuments destroyed during the war being voted winner of a European Union (EU)-supported hackathon

‘I hope that, after the war, Ukrainian fintechs will change the world’ – a report on Rostyslav Dyuk delivering a keynote address during the inaugural Global Government Fintech Lab (1 June 2022)

‘EU backs “Fintech Challenge for Ukraine” hackathon’ – news story (16 May 2022) on the contest to develop technological solutions that would ‘enable access to and provision of everyday services to Ukrainians and help the country’s recovery’

‘Ukraine fintech push aims to help SMEs with digital finance’ – news story (19 May 2021) on the International Finance Corporation, in partnership with the Swiss State Secretariat for Economic Affairs (SECO) and the UK government’s Good Governance Fund, working with UAFIC to help small- and medium-sized enterprises (SMEs) understand and capitalise on digital finance

‘Ukraine ministry steps up digital money efforts’ – news story (7 January 2021) on the Ministry of Digital Transformation’s partnership with the Stellar Development Foundation