April 14, 2024

Ukraine’s New Restrictions On Fiat Will Boost Crypto Popularity

The central bank of Ukraine recently made adjustments to its fixed exchange rate of the country’s fiat currency against the US dollar. In addition, it also introduced tougher limits on citizens in terms of transactions conducted in the local currency. A local crypto community representative said that these new rules were likely to drive Ukrainians towards cryptocurrencies for their transactions.

War-time measures

New rules were recently introduced by the National Bank of Ukraine (NBU) because the ongoing war with Russia has resulted in changes in the fundamentals of Ukraine’s economy. The Ukrainian hryvnia, which is the local currency, was devalued by the monetary authority by 25% against the US dollar. Moreover, they also introduced new banking limits on transactions with fiat currency.

The regulations were enforced on July 21st and are primarily for private individuals. These state that banks will only be permitted to sell customers non-cash foreign currency only if the customers deposit the amount for at least three months and they will not be able to terminate the contract.

Payment cards previously had a withdrawal ceiling of 50,000 hryvnia, but it has now been replaced with a weekly limit of about 12,500. Similarly, cards issued by banks in Ukraine could previously be used for peer-to-peer transfers abroad of a value of 100,000 hryvnia, but now they have been reduced to 30,000 hryvnia. They have also set a limit of 100,000 for hryvnia cards that can be used for cross-border settlements.

Impact of restrictions

Kirill Shevchenko, the Governor of the NBU, said that all the measures that have been introduced since the war began are just temporary and aimed at helping the economy survive the ongoing conflict. But, there is no denying that these measures are affecting Ukrainian citizens and not in a good way, particularly those who were forced to leave Ukraine and have not been able to return.

Mikhail Chobanyan, the founder of Kuna, a crypto exchange in Ukraine, said that the latest restrictions from the NBU would only result in increased interest in cryptocurrencies amongst the nation’s citizens. The entrepreneur said that 100,000 hryvnia was a very small value and people would eventually turn to cryptocurrencies for their payment purposes because of the restrictions.

He also noted that volunteers would also face difficulties because of the new limits, as most of the humanitarian assistance is bought through cards that individuals own, or have been issued by banks in the country. The founder of the crypto exchange said that all of these will switch over to cryptocurrencies completely.

Moreover, Chobanyan also criticized the policy of the central bank. He said that it was quite aggressive and also added that this would ultimately result in losses for the state budget, along with banks in the country. As for the National Bank of Ukraine (NBU), it is taking steps that it sees fit for protecting the economy of Ukraine, while it defends itself from the Russian onslaught that does not appear to be stopping.

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