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Ukraine’s latest Fiat rules to increase crypto popularity in the country

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TL;DR Breakdown
  • Ukraine has imposed new rules restricting Fiat usage.
  • The measures include reducing the value of the local currency against the dollar by 25%.
  • Most people might shift to cryptocurrency to beat the Fiat restrictions in the coming days.

The act of modifying the exchange rates of Hryvnia to US dollars and restricting the exchange quantity may push Ukrainians to crypto. The representative of Ukraine’s local crypto sector holds that the latest Fiat restrictions could benefit the sector.

The armed war between Russia and Ukraine has called for these new measures. There was a shift in the foundation of the country’s economy, and the National Bank of Ukraine (NBU) had to issue new rules.

On Thursday, the NBU reduced the value of the Ukrainian hryvnia by 25% in comparison to the robust US dollar. Besides, the finance department also imposed new restrictions on the types of banking transactions one can conduct using the hryvnia.

The amended rules for private individuals that went into effect on July 21 are stiff. For instance, banks can only sell non-cash foreign currency to their clients if they deposit the amounts for at least three months. Furthermore, there is no option to end the contract.

A limit of 12,500 hryvnias ($340) each week is now placed on the amount one can withdraw from payment cards. Before, the limit had been 50,000. The largest amount peers can transfer using cards issued by Ukrainian banks has gone down from 100,000 hryvnias ( $2,700 ) to 30,000 hryvnias ( $800 ). Additionally, the most significant number of monthly transactions one can make with hryvnia cards when making payments across international borders stands at 100,000.

Ukraine’s Fiat restrictions are temporary

Kirill Shevchenko, the governor of the NBU, has assured everyone that these measures are temporary. He affirmed that the war calls for special measures to sustain the economy’s operation. However, the steps are having a significant impact on people in Ukraine. For example, the millions of people have difficulty to operate smoothly with the new restrictions.

Mikhail Chobanyan is the founder of the Ukrainian crypto exchange Kuna. Recently, he gave an interview to the crypto news outlet Forklog. During the session, he said that the recent restrictions by the NBU could spark a surge in interest in cryptos among Ukrainians. He expects the volume of transactions and the number of people using cryptocurrency will rise.

Fiat restriction could slow down donations

Chobanyan also pointed out that the new restrictions will make it more difficult for people to make donations. He pointed out that the payment for most of the aid provided to those in need is via credit cards. 

The credit cards are issued by Ukrainian banks and owned by private individuals. “Now we will entirely switch these flows to crypto,” said Chobanyan, who defined the central bank’s strategy as aggressive. He also warned that Ukrainian banks and the state budget would be the losers in this situation.

The only way to beat the system and continue normal operations for Ukraine is by adopting cryptos. The current regulations have stiffened the financial freedoms of the people.

Even though they are temporary, it is never clear when Ukraine will lift such rules. Moreso, because they are a repercussion of war, one can’t be sure when it will stop. The new restrictions make it difficult for people to use their credit cards. The limits are very extraordinary.

The libertarian ideals of the world brought the crypto concept to overcome such restrictions. The idea was to invent a currency and a sector that operated independently from the mainstream. Crypto proponents frequently argue that the traditional system is corrupt and dominated by systems. Thus, crypto provided the only way to rectify the problem.

It is not to the liking of the authorities in charge of finance for there to be financial mediation that sidesteps their requirements—guidelines such as anti-money laundering and know your customer (KYC) have become meaningless.

Nellius Irene

Nellius Irene

Nellius Irene is a cryptocurrency investor and journalist who has been in the nascent space since 2018. She has researched and written on several crypto-related topics including non-fungible tokens (NFTs), decentralized finance (DeFi), fundraising, mining, etc. Her major focus is covering regulatory events that are capable of shaping the entire crypto ecosystem.

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