Ukraine is continuing the work on its digital hryvnia, or e-hryvnia, despite the ongoing aggression by Russia.
The National Bank of Ukraine (NBU) introduced a draft concept for its central bank digital currency (CBDC) on Monday this week. The statement said that the key purpose of e-hryvnia is to perform all the functions of money by supplementing the cash and non-cash forms of the hryvnia.
During the discussion with the representatives of banks, non-banking financial institutions, and the virtual asset market, the National Bank presented the possible design of the e-hryvnia, its architecture, characteristics, and advantages for payment service providers, it said.
Among those, the bank has presented the possible options for the usage of its CBDC, which are currently under consideration and development. These are:
- e-hryvnia for retail non-cash payments with the possible functionality of “programmed” money: for the implementation of social payments, the reduction of government expenditures on administration and control of the use of funds, and the use of the smart contract technology for programming calculation logic depending on circumstances and facts;
- e-hryvnia for use in virtual assets-related fields: this includes exchanges and provisions of issuance;
- e-hryvnia to enable cross-border payments: these payments would be faster, cheaper, and more transparent.
Specifically in regards to cryptoassets, the bank argued that,
E-hryvnia has the potential to become one of the key elements of qualitative infrastructure development for the virtual assets market in Ukraine.
The bank also stated that,
“In particular, the use of a technological platform for instant e-hryvnia payments, service programming and data flow analysis will create ample opportunities for the emergence of new business cases, digitalization of services, attraction of new customers, cost optimization, etc.”
‘The next evolutionary step’
The project was launched in September last week, with the goal of determining the feasibility of a large-scale issuance of a digital hryvnia in the country. During the creation of the concept, the regulator took into account its own research and the results of a survey of financial market experts regarding the demand for the e-hryvnia conducted by the National Bank in 2021, as well as the experience of other countries developing CBDC, it said.
Deputy Chairman of the National Bank, Oleksiy Shaban, was quoted as saying that the development and implementation of this CBDC could be “the next step in the evolution of the payment infrastructure of Ukraine,” while it would also contribute to:
- the digitalization of the economy,
- further expansion of cashless payments,
- reduction of costs,
- increase in the level of transparency,
- increase of trust in the national currency in general.
Shaban opined that all this could have a positive effect on the country’s economic security and monetary sovereignty, as well as the ability of the National Bank to maintain price and financial stability as a guarantee of sustainable economic growth.
Per the bank,
“The use of e-hryvnia should be convenient and accessible to all segments of the population, legal entities, state bodies, banks and non-bank financial institutions.”
The bank will continue to develop the e-hryvnia concept project with participants of the payment market, participants of the virtual assets market, and state bodies, it concluded.
Meanwhile, as reported yesterday, India is advancing its CBDC efforts as well. The country will undertake the first pilot for retail digital currency on December 1, the central Reserve Bank said on Tuesday. Four local banks — State Bank of India, ICICI Bank, Yes Bank, and IDFC — will participate in the initial phase of the pilot in four cities: Mumbai, New Delhi, Bengaluru, and Bhubaneswar. Bank of Baroda, Union Bank of India, HDFC Bank, and Kotak Mahindra Bank will join the pilot subsequently, it said.
In Japan, the central bank could begin piloting the digital yen as early as spring 2023 and will reportedly start a trial involving “consumers and private sector companies.”
And Mainland China and Hong Kong are set to co-launch the digital yuan’s first cross-border pilot project, as the People’s Bank of China (PBoC)-led project edges closer to rollout.
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