Ukraine’s central bank sees both promise and threat in Bitcoin

The National Bank of Ukraine (NBU) has expressed a mixed attitude towards cryptocurrencies such as Bitcoin (BTC) after a year of war in the country.

The Central Bank of Ukraine sees both good and bad in digital assets, taking a more skeptical approach to crypto due to financial and economic problems caused by the invasion, according to the NBU’s press office.

In April 2022, the NBU banned citizens from buying cryptocurrencies such as Bitcoin using the national currency, the hryvnia (UAH), and only allowed such purchases via foreign currency accounts. The central bank also set a monthly limit on such purchases, prohibiting Ukrainians from buying more than UAH 100,000 ($3,300) worth of crypto per month. The restrictions also apply to cross-border peer-to-peer transactions.

The administrative restrictions involving operations with cryptocurrencies in Ukraine are temporary, a press officer of the NBU told Cointelegraph on March 9. The limits will “gradually weaken as the functioning of the economy and financial market in Ukraine normalizes,” the NBU said, adding. :

“The National Bank participates in building a system of transparent and understandable regulation, which will contribute to the development of fair and efficient circulation of virtual assets.”

According to the regulator, the specified restrictions were necessary for Ukraine to stabilize the situation in the foreign exchange market and preserve macro-financial stability.

“Transactions with cryptocurrencies can be used to circumvent currency regulation, in particular – as a channel for unproductive capital outflow from the country, which currently poses a threat to macro-financial stability,” the NBU representative said.

Related: Ukraine has collected $70 million in crypto donations since the Russia conflict began

The Central Bank of Ukraine also sees the risk of “substitution of the national currency and the emergence of parallel money circulation.” According to the NBU, such risks are particularly high during the war and are beyond the regulator’s effective control. “This could pose a threat to the state’s monetary sovereignty,” the NBU spokesperson noted, adding:

“To minimize such risks, especially during the full-scale war, the National Bank will take a strong position to prevent the narrowing of the scope of the hryvnia as the only legal tender in Ukraine.”

Despite a cautious approach to crypto during the war, the Central Bank of Ukraine remains optimistic about technological innovations related to digital assets. According to the NBU, there are many promises related to crypto, including better access to financial services, competition in payment services, attraction of investments, crypto donations and other benefits.

As such, the central bank supports the need to create “civilized conditions for the development of the virtual assets market in Ukraine,” the NBU’s press office stated.

The latest comments from the NBU came shortly after Yurii Boiko, commissioner of Ukraine’s National Securities and Stock Market Commission, declared that the war had no impact on the authority’s regulatory stance. According to the official, Ukraine has continued to follow in the EU’s footsteps when it comes to digital asset laws.