The virtual currency Bitcoin cannot be used in Ukraine as a means of payment.
The above was announced in a post on the official website of the National Bank of Ukraine (NBU). According to the regulator, Bitcoin and other cryptocurrencies represent "money substitutes.”
Bitcoin: not in Ukraine?
It should be clarified, however, that the announcement does not officially ban Bitcoin as no actual law was passed to date. The NBU simply reiterated its previous position, warning citizens to be vigilant of potential scams with Bitcoin, which is “often used for illegal activities.”
The National Bank seems to echo its Russian counterpart by stressing that international payments that are transacted using digital currencies can facilitate crime such as money laundering and terrorist financing. Where have we heard that before?
Finally, the NBU reasserted that the Ukranian hryvnia (UAH) is the only legal currency for the payment of goods and services in the country. In other words, all prices must be denominated in UAH and nothing but the national currency can be used for transactions, business records, prices or taxes.
The representatives of the regulator stated:
"In order to protect consumers' rights and the security of transferring money, the National Bank recommends that you use the services of only those payment systems, and settlement systems, which are included in the registry of payment systems, settlement systems, and participants of these systems and payment service infrastructure providers.”
The move comes not only amid worsening relations between neighboring Russia and fighting separatists in its eastern provinces, but also in a time when Ukraine’s national currency, the hryvnia, has plummeted in value against the dollar since protests began about a year ago.
To better assess the situation on the ground, we asked a couple of questions to the founder of the Kuna Bitcoin Agency, Michael Chobanian, who back in September opened the first Bitcoin embassy in Ukraine.
Cointelegraph: After the announcement from the NBU, did you face any challenges in running your Bitcoin business in Ukraine?
Michael Chobanian: The announcement does not affect my business in any way. This is a simple runaround. Based on the contents, it’s clear that the NBU does not understanding the situation.
CT: What was the demand for Bitcoin like after the Hryvna weakened against the dollar?
MC: We have seen a jump in demand as this news really sparked sales.
Bitcoin in Ukraine
Indeed, Ukraine does have a burgeoning Bitcoin community with the number of Bitcoin users in the country estimated to be upwards of 236,000 and growing according to the recently held Bitcoin conference in Kiev.
Moreover, there have been some interesting innovations as well as far as buying and selling bitcoins is concerned. In fact, Ukraine has taken advantage of a large network of street cash-in machines that can be used to fund your bank account, pay invoices or top up your cellular or internet accounts, using the same infrastructure to buy bitcoins. What’s more is that the number of these machines converting between Bitcoin and cash has exceeded 4,000 units thanks to a partnership with the Ukranian Bank National Credit.
Therefore, it will be interesting to see not only how the operators of this service will be affected by the NBU statement but, more importantly, how the authorities will actually enforce this ruling down the road and physically prevent its citizens from using a currency that's “designed for the internet.”
This is particularly significant since cryptocurrencies offer many comparative advantages that, besides speed and international appeal, could also give Ukrainian citizens a better store of value to hedge against the free-falling hryvnia.
Meanwhile in Russia
Despite the growing conflict between Ukraine and Russia, however, the central banks of both countries appear to be on the same page with Russia still working on how it will approach and enforce its proposed ban. There does seem to be some activity happening on that front, however, when yesterday, as was reported by CoinDesk, Russia’s Ministry of Finance lowered the proposed fines for both individuals, government officials and legal entities that use Bitcoin.
Yuri Filipov, a Russia-based blogger who writes for Coinside.ru, explained to Cointelegraph via email:
“There was a public discussion of the bill [and] 21 respondents left their responses, mostly positive to Bitcoin, while the only humorous ‘negative’ one was chosen by the experts. [A]nd proposal about fees strangely was lowered from 60K rubles to 50K.”
The new terms now dictate that the fine for individuals directly using cryptocurrencies or “money surrogates” will be a fine of up to 50,000 rubles (approx. US$1,050), down from 60,000 rubles (US$1,314), while the penalty for the dissemination of information regarding these “surrogates” will comprise 5,000–30,000 rubles (US$100–630), reduced from 5,000–50,000 rubles (US$125–1,250).
Additionally, officials who use digital currencies will now be fined up to 80,000 rubles (US$1,753), down from 100,000 rubles (US$2,500), while a 50,000 ruble fine ($US1,097), which is down from 100,000 rubles will be imposed on the same officials engaging in the dissemination of information on cryptocurrencies.
Lastly, legal entities now face a maximum fine of 500,000 rubles (US$12,500) for dealing in cryptocurrencies, down from 1m rubles (US$25,000), while the penalty for spreading information was lowered from 1 million rubles (US$21,946) to 300,000 rubles (US$6,576).
It is not clear why the fines were lowered or why these particular figures were chosen. “I guess that the fees are bound to Bitcoin price,” said Yuri, “and since rates are going down, they lowered the fees.” But as far as the penalty amounts are concerned, “I actually no idea what calculations they use,” he concluded.
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