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Ukraine ministry steps up digital money efforts

Ukraine: stepping up preparations for a potential digital hryvnia | Credit: Leonhard Niederwimmer; Pixabay

Ukraine’s government has announced a partnership with the Stellar Development Foundation to assist with its digital money strategy and infrastructure.

The Ministry of Digital Transformation has signed a memorandum of understanding with the US-headquartered organisation to ‘develop virtual assets and to facilitate central bank digital currency (CBDC) infrastructure’.

The ministry, which was established in 2019, has been championing the ‘state in a smartphone’ initiative that aims to accelerate digitalisation in the eastern European country.

Deputy minister Oleksandr Bornyakov announced that the ministry has engaged Stellar to help with numerous finance-related digital asset initiatives, including the regulation of so-called stablecoins and to ‘facilitate the development’ of a potential Ukrainian digital currency.

The overall ambition is to ‘develop a modern virtual asset market infrastructure and enhance Ukraine’s status as an innovative digital country in the financial market in eastern Europe’, according to the ministry’s announcement [Ukrainian language].

Ukraine – which currently has no cryptocurrency regulations – is currently the leading country in the world for cryptocurrency adoption, according to analysis published in September by blockchain analytics firm Chainalysis. The ‘Chainalysis 2020 Geography of Cryptocurrency Report’ put the country ahead of its neighbour Russia and South American nation Venezuela in a ranking.

Developing laws and infrastructure

Ukraine’s Parliament registered a draft law on payment services (‘Проект Закону про платіжні послуги’) in November to modernise payments regulation in the country, which has a population of more than 40 million. The draft law includes the establishment of a definition of CBDC and secures the authority of Ukraine’s central bank, the National Bank of Ukraine (NBU), to issue a digital currency, if a decision is made to do so.

The NBU has been researching the possibility of launching a CBDC – a digital hryvnia – since 2017.

“The Ministry of Digital Transformation is working on creating the legal environment for the development of virtual assets in Ukraine. We believe our co-operation with the Stellar Development Foundation will contribute to development of the virtual asset industry and its integration into the global financial ecosystem,” said Bornyakov, who is deputy minister of digital transformation for IT development, announcing the SDF partnership.

“Another important aspect of this co-operation is contributing to the development of the infrastructure for a Ukrainian national digital currency,” Bornyakov continued. “Most of the world’s leading countries are developing their own national digital currencies. The National Bank of Ukraine [work on CBDCs] demonstrates Ukraine’s movement towards one of the major financial trends. At the ministry, we aspire to ensure our country’s adaptation to technological innovations and competitiveness in the financial market in eastern Europe.”

Exploring blockchain’s potential

The SDF is a non-profit organisation that supports the development and growth of Stellar, an open-source cross-currency transaction system and platform for digital asset issuance.

SDF’s chief operating officer, Jason Chlipala, is leading its work with Ukraine. He told Global Government Fintech: “We were first introduced to the ministry by a member of the Stellar community in Ukraine. It presented an exciting opportunity for SDF given the ministry’s leadership and vision for building an innovative and thoughtful digital asset strategy for all of Ukraine and because as an organisation, we believe deeply in fostering public-private partnership to deliver on the potential of blockchain technology.”

In its own announcement of the Ukraine partnership, the SDF’s chief executive and executive director, Denelle Dixon, said: “We believe digital assets and national digital currencies are one of the most important innovations of our lifetimes and we are excited to play a role in the creation of Ukraine’s digital asset infrastructure.

“We look forward to working with the ministry and other stakeholders to digitise the hryvnia, to bring Stellar-based tools and services to the people and businesses of Ukraine, and to introduce new partnership opportunities in Ukraine to businesses in the Stellar ecosystem,” she added.