National Bank Of Ukraine _NBU_ Bans the Purchase of Crypto with Local Fiats

2022-05-11, 10:04

The central bank of Ukraine has prohibited the purchase of cryptocurrencies with the local Ukrainian currency, using martial law that has been in place following the war with Russia. The bank gave the notice against the purchase on Thursday, April 22, 2022. Therefore, the citizens must not buy cryptocurrencies with their local currency but can purchase with foreign currency within the limit of $3,300 monthly, equivalent to 100,000 Ukrainian Hryvnia.

Before this, the Ukrainian government legalized cryptocurrencies sometime in February and has received support worth millions of cryptocurrencies towards the War against Russia.

According to the National Bank of Ukraine (NBU), the purpose of the ban is to preserve the health of its national fiat currency, the Hryvnia. The essence of the restriction is to improve conditions in the foreign exchange market.

Source: www.ukrgate.com

The Unexpected Ban

The National Bank of Ukraine (NBU) has officially announced the ban of Cryptocurrency purchases with the local Fiats. Under martial law, the restriction should prevent the "unproductive outflow of capital". In its official release, the bank stated that crypto-investments are called 'Quasi cash Transactions.'

"Quasi cash transactions […] are mainly carried out to circumvent the current restrictions of the National Bank, in particular for investing abroad, which is prohibited under martial law. Therefore, the relevant transactions should be interpreted as leading to unproductive capital outflows," the bank asserted.

The national bank stated that the ban was not a total prohibition of cryptocurrency-related purchases but a restriction on using local currency to purchase crypto. The ban allows Ukrainian citizens who want to buy cryptocurrencies or buy bitcoin and other digital assets with foreign currencies. This purchase comes with a Total monthly threshold of UAH 100,000, approximately $3,300.

Source: www.alarmy.com

Ukrainian Government Attitude towards Cryptocurrency

Previously before the ban, The Ukrainian Government had given a welcoming hand to the adoption of Cryptocurrencies; on March 16, President Zelenskyy signed a new measure on virtual assets into law, making cryptocurrencies fully legal in Ukraine.

Ukraine has ingeniously used cryptocurrencies to raise money for the war effort since the invasion. On February 26, the country tweeted that it was "accepting cryptocurrency donations," with links to two crypto wallets where Bitcoin, Ether, and Tether could be sent. According to analytics firm Elliptic, the wallets were a big success, raising $63.8 million from over 120,000 crypto asset donations.

However, The central bank discovered that $1.7 billion was transferred out of Ukrainian institutions in March and $900 million in early April since the war's inception. This large amount of money leaving the country is putting some pressure on the devaluation of Ukraine's currency, which is seen to be the cause of the restrictions.

The Expected Results The Prohibition

The National Bank believed this restriction would improve the conditions of its economy amidst the war. This statement is according to the announcement from the bank:

"The National Bank of Ukraine estimates that said changes will improve conditions on the foreign exchange market, which is a prerequisite for further easing the restrictions and relieving pressure on Ukraine's international reserves."

According to multiple reports, some Ukrainian banks have already implemented such limits. In mid-March, PrivatBank, Ukraine's largest commercial bank, reportedly stopped its customers from acquiring BTC using UAH.

Author: Gate.io Observer M. Olatunji
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* This article represents only the views of the observers and does not constitute any investment suggestions.
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