Ukraine bans virtual assets purchases with local currency

Ukraine has moved to curtail capital outflows from its economy through the digital assets market. The National Bank of Ukraine (NBU) announced that it is banning Ukrainians from buying digital currencies such as BTC with the hryvnia (UAH).

The central bankers stated that citizens are still permitted to invest in the market with their foreign currency holdings. However, even this is with significant limits. Citizens are restricted from spending more than UAH 100,000 (equivalent to $3,300) a month on such investments.

According to the NBU notice, digital assets purchases are classified as “quasi cash transactions” along with deposits to electronic wallets, brokerage or forex accounts, and payment of traveler’s checks.

The restriction has become necessary to reduce pressure on Ukraine’s foreign currency reserve through “unproductive capital outflows.” The restriction will also allow the country to focus its foreign reserve spending on priority sectors like export-import transactions.

“According to the National Bank, the relevant changes will help improve the foreign exchange market, which is a necessary prerequisite for further easing of restrictions, as well as reducing pressure on Ukraine’s international reserves,” the notice said.

The NBU also noted that the restriction is being implemented to plug the circumvention of its directive that restricted cross-border peer-to-peer transactions. The restriction was part of countrywide martial law amidst its ongoing war with Russia.

Ukraine still considers digital assets as legal

Despite the latest measure, the European country still gives digital assets legal recognition. Back in February, the country’s parliament signed a bill to that effect that will usher in comprehensive regulations for the industry in Ukraine.

From the start, the bill appears to be yielding some benefits for virtual assets services providers (VASPs). It has removed several agencies that previously monitored the market, placing oversight authority in the hands of only the NBU and the National Securities and Stock Market Commission of Ukraine.

Ukraine has also been the recipient of a lot of support from the digital assets market globally. As of last month, market participants had donated over $100 million in various digital assets to the country. Ukraine has also issued an NFT collection to raise funds to support its war efforts.

On the one hand, the community has supported Ukraine; however, on the other hand, Russia has seen itself inundated with multiple sanctions. These have included sanctions targeted at its ability to use digital assets to circumvent financial and economic sanctions placed on it by the international community.

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