The National Bank of Ukraine (equivalent to the central bank) took another step on the road to the creation of its own digital currency (CBDC), the e-hryvnia. In a context of war and crisis, the country is aiming at the monetary instrument with which it seeks to digitalize its economy.
The institution indicated in a press release that the draft concept of the e-hryvnia is presented with the intention of receiving “comments” from the banking, financial and virtual assets sector on Ukrainian soil.
“The e-grivna is an electronic form of the monetary unit of Ukraine, which will be a direct obligation of the central bank. Its key purpose is to effectively perform all functions of money, complementing the cash and non-cash forms of the hryvna,” the central bank states in its press release.
The project of the e-hryvnia has an old date. There was already talk of a cryptoasset based on Ukraine’s national currency since 2018, and last year studies were started by the central bank to determine the feasibility of large-scale issuance of the e-hryvnia.
The National Bank of Ukraine took it upon itself to present a possible design for the e-grivna, as well as its architecture and other features, to the payment service providers living in the country, currently at war.
According to Ukraine’s top monetary body, for the presentation of the draft concept of their own CBDC they took into account the results of a survey of “financial market experts” made in 2021, as well as the experience in the development of digital currencies of central banks around the world and their own research.
According to Oleksiy Shaban, deputy governor of the National Bank of Ukraine, both the development and implementation of e-hryvnia could be “the next step in the evolution of Ukraine’s payment infrastructure.”
Also, they could “contribute to the digitalization of the economy, wider dissemination of non-cash payments, reduce their value, increase their transparency and increase confidence in the national currency as a whole.”
“This can have a positive impact on ensuring economic security and strengthening the state’s monetary sovereignty, strengthening the National Bank’s ability to maintain financial and price stability as a guarantee of sustainable economic growth,” the Ukrainian banker said.
Various use cases
According to the Central Bank of Ukraine, their intended digital currency could have a suitable use in retail payments, due to its potential “programmable” money functionality. Just like fiat, this money generates inflation when issued without economic growth backing.
According to the bank, e-hryvnia will be useful for “specific social payments, reduction of public spending in administration and control of the specific use of funds”.
The bank also points out that, hand in hand with the e-hryvnia, the market of virtual assets (such as bitcoin and cryptocurrencies) could develop its infrastructure with “high quality” on Ukrainian soil, since they intend that these will have a greater circulation from the issuance of the CBDC.
The National Bank of Ukraine further noted that e-hryvnia could “ensure the possibility of cross-border payments”. From its perspective, this technology will make international payments “faster, cheaper and more transparent”.
The monetary institution clarified that what was presented this week was a draft of the e-grivna concept. Therefore, they estimate to eventually create a concept with “comprehensive considerations” of the interests and needs of market participants later on.
“The National Bank of Ukraine, like most central banks in the world, will approach the issue of issuing its own digital currency in a balanced manner and taking into account, in particular, the potential impact of its introduction on the state financial system,” the governing body noted.
The war and support for Ukraine with bitcoin.
The draft Ukrainian e-hryvnia concept comes as several countries move forward with the creation of their own CBDCs.
The Ukrainian bank’s move also comes at a time when the war against Russia is intensifying and is approaching its one-year anniversary. Because of this war situation, Ukraine became notorious for starting to accept bitcoin and cryptocurrencies as donations.
This practice continues, and everything suggests that it will continue as long as the war lasts, taking into account that the central bank is in the first steps of the creation of its CBDC and its design could take some years to be finalized, as is currently the case with the digital euro, of the European Central Bank.