In brief
- Bitcoin is popular in Ukraine.
- The country legally recognized cryptocurrency this year.
- It's taking the next step in creating a central bank digital currency.
Editor's note: The original headline stated that Ukraine's central bank would run the pilot. It has been changed to reflect that the pilot is being launched by TASCOMBANK and Bitt under the central bank's supervision.
The Stellar Development Foundation announced today that the Stellar blockchain will be used to pilot an electronic version of the hryvnia, the national currency of Ukraine. The pilot, being carried out by FinTech firm Bitt and TASCOMBANK, will be overseen by the country's central bank with the encouragement of the Ministry of Digital Transformation.
In January, the ministry announced it had partnered with the Stellar Development Foundation, which promotes the use of XLM cryptocurrency and the Stellar blockchain, to create a central bank digital currency—something the National Bank of Ukraine had been exploring since 2017. CBDCs leverage decentralized ledgers such as blockchains to enable quicker, more efficient payments in the national currency.
"This pilot project will serve as a technological basis for the issuance of electronic money, and is the next key step to advance innovation of payment and financial infrastructure in Ukraine," said Deputy Minister of Digital Transformation Oleksandr Bornyakov in a press release.
Ukraine's relatively quick path from partnership to trial means it is well ahead of most other European countries and the European Central Bank in developing a digital currency. Most central banks are still researching potential use cases of CBDCs.
France is the farthest along of any European nation. It recently ran a cross-border payments experiment in conjunction with a Swiss bank. Outside of Europe, China is in the middle of testing a digital currency, as are a handful of other countries, according to research site CBDCTracker.org. Thus far, The Bahamas is the only one to hit the launch button; its central bank rolled out sand dollars to the Caribbean nation's nearly 400,000 citizens in 2020.
Cryptocurrency is popular in Ukraine, both with the people and politicians. Ukraine has the highest crypto adoption rate in the world, according to a September 2020 ranking from blockchain analytics firm Chainalysis. And in 2019, the government created the Ministry of Digital Transformation, with the agenda of widening digital literacy and increasing internet accessibility.
The ministry has broadened its mandate to incorporate cryptocurrencies, drafting a bill earlier this year to legalize Bitcoin and other crypto; the legislation provided legal protections to holders and gave the greenlight to banks to provide services to crypto firms.
The ministry believes that crypto-friendly policies will attract a new range of financial services to the country. TASCOMBANK Chairman Volodymyr Dubey agrees.
“With the rapidly growing impact of virtual assets on our everyday life and economic landscape, it is essential to utilize the advantages of blockchain technology and new related products as a part of the bank’s long-term market strategy," he said.