Category Archives: Hryvnia

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Ukraine Developing a National Cryptocurrency

The National Bank of Ukraine (NBU), the country’s central bank is engaged in developing a national cryptocurrency. Reports indicate that this cryptocurrency will be centrally controlled by the NBU and at parity with Ukraine’s national fiat currency, the Hryvnia (UAH). It is possible the Ukrainian national cryptocurrency will be called the e-hryvnia.

An advisor to the Head of the Association of Ukrainian Banks, Alexei Kushch, says “Many central banks are developing similar national currencies. Now the currency circulation in Ukraine functions in two spheres: it is cash and non-cash, that is accounts in banks. And with the help of Blockchain technology, you can start the third form – digital. Digital money will also be in bank accounts but will be recorded on an electronic wallet. At the same time, due to the Blockchain technology, money will be protected from fraud, hacker attacks, and illegal withdrawal. This is quite a promising direction, which, on the one hand, will protect human rights in terms of property, and on the other – significantly reduce the costs and time of transactions, and accelerate the turnover of money in the country”.

Indeed, fiat payment networks are often prone to hacking, whereas a properly developed cryptocurrency is impossible to hack even with the world’s most powerful supercomputer. This may be particularly important in Ukraine since the country has been in a prolonged war with Russia, which has resulted in the loss of the Crimea and there continues to be an active frontline in southeast Ukraine. Russia has been engaged in cyber-warfare with Ukraine’s banks, i.e. hacking, to destabilize Ukraine, and the results have been devastating. A properly built national cryptocurrency would eliminate threats from Russia, helping to maintain Ukraine’s sovereignty.

The NBU will be able to print the national crypto at will, much like they do with their fiat currency. However, costs of printing crypto are essentially zero, while it costs millions of USD to print fiat currency, so that will save the Ukraine money at a time when they desperately need it. The national crypto will be exchangeable through banks for fiat currency, which will maintain its parity with the UAH, much like how Tether (USDT) is redeemable for USD and that maintains its parity with the USD.

The national crypto that Ukraine is proposing sounds similar to the national crypto the People’s Bank of China (PBoC) is developing. Clearly, national cryptos are becoming a trend, and perhaps in the future, every country will have a national crypto. It makes sense, since cryptocurrency is much faster, has lower fees, and is more secure than fiat currency.

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Bitcoin is ‘Back in the USSR’

Russia’s launch of its first crypto investment bank is the hot news from Eastern Europe’s sleeping bear, but how is the old USSR and the rest of the eastern bloc holding up in the charge to regulate the nascent industry in the region?

In the Ukraine capital, Kiev, plans are underway to site a statue of the pseudonymous creator of Bitcoin, Satoshi Nakamoto, in the same location where a statue of Russian communist revolutionary Lenin, used to stand. This appears to augur well for the bitcoin community… or does it?

Things are changing since ex-President Victor Yanukovich created his own cryptocurrency oligarchy; the pro- Russian leader is now exiled in Russia and wanted in his home county for high treason. Today, according to businessman Michael Chobanian, who opened the first Ukraine exchange offering national currency hryvnia for Bitcoin: “Ukraine is a haven for cryptocurrency – no one can or will stop you.”

His comments don’t exactly ring true in light of recent swoops by state security forces on Kvazar semiconductor plant in Kiev, where a large mining operation was located. This, a month after armed men from Ukraine’s Security Service broke into the Odessa offices of ForkLog, a major Russian-language crypto news site, and seized its computers and hard drives.

In an attempt to start a dialogue on cryptocurrency, Alexei Mushak, a member of the Ukrainian parliament, has sought to urge the people to comment on Bitcoin, taking to Facebook to do so recently, stating:

“We go to the home stretch to create conditions for digital tokens and cryptocurrency in Ukraine. This is the outcome of many meetings and work of many people. There are many more nuances left to figure out…”

Cryptocurrency regulation in Ukraine remains a work in progress, despite the National Bank of Ukraine (NBU) stating that it was “considering” introducing a digital version of the hryvnia earlier this year.

Ukraine’s northern neighbor Belarus has taken what appears to be a sensible approach to a difficult problem in some of the old USSR states. Both blockchain and cryptocurrency related business activities are legislated under the law in Belarus. Mining and exchanges are not regarded as business activities and consequently are not subject to taxation. In fact, the great news for crypto investors is they are not required to declare crypto income until 2023.

Traveling through the old USSR even further north, Estonia even toyed briefly with launching its own cryptocurrency, the Estcoin, through the country’s e-residency program, but later shelved the idea.

The e-residency program, introduced in 2014, allows non-Estonians access to national services such as company formation, banking, payment processing, and taxation. The program also allows anyone in the world to apply for a digital ID card and gain access to Estonian e-services when planning to start a company in the country.

Many crypto companies are now doing business in Estonia and the Baltic region is becoming a “Northern crypto-paradise” along with Lithuania and Latvia, both also experiencing an economic boom recently. Estonia’s widespread adoption of cryptocurrencies and fintech has, therefore, become a breeding ground for new startups.

Latvia has the crypto bug, but not necessarily the support it would want from its government, with the Latvian central bank maintaining a keep away stance as its advice to customers.

Latvia currently levies a 20% capital gains tax, and applying it to cryptocurrency would reportedly require a change in the country’s tax laws. Currently, cryptocurrencies are not recognized under existing legislation. However, its exponential growth in the Baltic country has generated an increased interest from the government as a potential tax revenue.

Lithuania has recently become a growing center for ICOs and crypto projects. Latest figures show that Lithuania is now attracting an impressive 10% of all global ICO investments, with cryptocurrency bringing in half a billion euros from such activities.

 

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