Ukraine Set to Develop State-backed Cryptocurrency, e-Hryvnia
Ukraine appears set to release a state-backed cryptocurrency, called the e-Hryvnia. Local Ukrainian journalist Anton Drannik has reached out to the National Bank of Ukraine to find out the details surrounding new virtual currency rumors. The bank has responded that it will be a centralized, government-backed, fully transparent system with KYC procedures. It will have its own blockchain, as well as other features available in the crypto market.
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Online Payments Need New Options for the Intellectual Elite
The Ukraine government thinks that the time has come to introduce a new payment option to the electronic currencies market. The new cryptocurrency will be called the e-Hryvnia. The main aim of the e-Hryvnia is to unload the cash market into a digital form.
Indeed, sometimes even the leading banks in the country experience trouble because of international groups of hackers who steal money by directly attacking bank servers. This has caused ATMs to go offline for a day or two, with payment operations slowing.
In general, the Ukrainian banking system is built by leading banks in the industry, from the E.U., Russia, and Ukraine. Banking secrecy works well in the country, as well as the right to obtain cash even if the bank suspects clients of shady transactions. Not everything is lost for Ukraine, so far, and the e-Hryvnia may become a viable solution to some of the local problems with payment transparency and safety.
Also, the production and issuance of paper and plastic payment instruments is costly. Virtual currencies may become a cheap and powerful alternative to local cash. NBU analysts are sure that citizens will be able to pay via this coin in any office, shop, or hospital for any type of good or service using their mobile phones.
e-Hryvnia, a Government Backed Centralized Cryptocurrency With its Own Blockchain
The e-Hryvnia will be exchanged to fiat Hryvnia at a 1:1 ratio, which means that the coin is not intended to battle inflation. The National Bank of Ukraine representative says that the e-Hryvnia must become one of the nation’s payment options. The cryptocurrency will be centralized and will operate under government supervision, and will mark yet another stablecoin.
Yet, a National Bank employee says that such a cryptocurrency is just a dream project for now:
“The decision regarding the necessity of introducing an electronic hryvnia on a full basis will be made only after we conduct detailed analysis.”
Financial Experts Share Opinions
Advisor to the head of Ukrainian Bank Association, Alexei Kush, says the idea is moving along:
“Such national currencies are now in development in many other countries. The currency circulation in the country now consists of two spheres: cash and virtual cash, i.e. bank accounts. And using the blockchain technology we can setup a third form–digital money. They will be accountable using bank accounts, but the coins are held on usual crypto-style addresses. At the same time, the assets will be protected from fraud, hacking attacks, and unauthorized withdrawals. This is a very sensible approach, which will allow us to protect human rights and private property and shorten the usual transaction time and cost, as well as fostering money circulation within the country.”
He also noted that the virtual currency is not like bitcoin and will not have anonymity features. Financial expert Ihor Lvov has a different perspective:
“The National Bank has the ability to launch the national e-currency. They can do it even tomorrow. The problem is right now there’s no need for it in the country. In conditions when the people are getting to the bottom of it all, they don’t care about how exactly to pay for goods–with cards, cash, or something else. People only care whether they can earn that money or not. That’s why I think we should figure out the monetary policy first, and only then resume thinking about cryptocurrencies and digital money.”
Lvov says that the main problem with the proposal is that it offers zero instruments of control:
“One of the cryptocurrencies quality is anonymity. That’s why even if you’ll receive a royalty or sell goods for cryptos, this will count as income too. But the control office won’t be able to trace such payments.”
Crypto Taxation Targets Large Private Investments
Ukraine also plans to impose a taxation on crypto revenues for its citizens. It wants to take five percent of all earnings in cryptocurrencies until 31st December, 2024. Then, the tax rate will increase to 18 percent. This is an issue that adds complexity. The authors of the forthcoming crypto law have calculated that Ukrainians hold around $98.7 million USD in private investments in different cryptocurrencies. Authorities had previously been uncertain about taxing crypto.
Despite the uncertainty, “digital gold” is becoming more popular in the country. Licensed cryptocurrency mining is legal.
Will a Ukrainian centralized cryptocurrency gain popularity? Share your views in the comments section below.
Images by Jeff Fawkes, Pixabay