The Central Bank of Ukraine paralyzed the e-Hryvnia project until it determines that issuing a CBDC will not generate instability in the economy.
Last February 21st, the Central Bank of Ukraine presented a conference in Kyiv, where it presented the results of its research on Central Bank Digital Currencies (CBDC). But although the institution stills developing the idea of issuing e-Hryvnia, other entities see this crypto asset as a risk or threat.
Although the bank has joined work teams to investigate and carry out tests that ensure the correct use of cryptocurrencies, the Central Bank of Ukraine stills holding concerns that it considers important for the country’s banking sector. The effect that can generate the Central Bank after issuing a cryptocurrency could be the source of financial instability that can greatly affect Ukrainian private banks, according to representatives of this bank.
Although the control of the issuance of these digital currencies will be in charge of the Central Bank and that for this reason no inflationary problems will be generated, it could represent a serious problem of instability for banks if the population stops using traditional money, the Central Bank of Ukraine explained.
Despite this, the Central Bank said that the cryptocurrencies issued by it have the particularity of increasing public confidence and security in their services. On this factor, the Central Bank of Ukraine published a statement expressing this advantage.
“Unlike bank accounts, Central Bank money is risk-free and 100 % guaranteed by the state. In other words, it is not only convenient but also reliable. Additionally, the digital currency can help reduce the amount of paper money in circulation. For many countries, this is an urgent task, since the underground economy is often fed with paper money”.
E-Hryvnia Project Will Be Paralyzed For Now
Although the aforementioned benefits may be of great importance for the country in the future, the Central Bank is still not sure that it is necessary to continue with the project. So Jacob Smol, who is the governor of the Central Bank of Ukraine, said that the e-Hryvnia project is not a priority and that, when it is determined that it will not be a risk factor for all sectors, its march will continue.
To be more specific, the official used his official Twitter account to make the institution’s decision public. “We have completed the pilot project, but we are still studying the possibility of issuing the e-Hryvnia. We will return to this subject when we are convinced that it is not only technologically feasible but that it will also not interfere with financial and price stability”, Smol said.
The Pilot Plan of E-Hryvnia
According to official data, the Central Bank of Ukraine had been developing the project for the issuance of a CBDC since 2016, but at the end of 2019, the pilot tests of its uses were concluded. The announcement of the end of these tests showed only the issuance of the equivalent of US $ 200. In this way, the Central Bank of Ukraine only issued “a very limited number of e-hryvnias within the pilot, just over 5,000 e-hryvnias, with a total value of $ 200”.
On these results, deputy head of Central Bank of Ukraine’s payment networks and innovative growth department, Olga Vasileva, argued that this cryptocurrency system can be valuable and effective for ordinary citizens, especially since it would completely eliminate the use of cash and would be a quick and cheaper method for common financial operations.
By María Rodríguez