Bitcoin purchases with UAH qualify as transactions that generate capital outflow. Transfers to international payment systems reached USD 1.7 billion in March.
Within the framework of the Martial Law proclaimed last February 24 in Ukraine, the Central Bank of that country revealed a set of prohibitions on cross-border operations, prohibiting people from purchasing bitcoin with the local asset, the hryvnia ( UAH).
In a statement released on April 21, the agency observed that, from now on, Ukrainians could only purchase bitcoin and other digital assets with foreign currencies. Total monthly purchases got limited to 100,000 UAH (about $3,300). This limit also applies to international peer-to-peer (P2P) operations.
In an amendment to a resolution issued at the end of February, the National Bank of Ukraine explains that the procedures went into action to prevent the outflow of unproductive capital from the nation. A situation boosted during the conflict unleashed since Russia’s invasion of Ukrainian regions.
The war has caused an increase in the number of citizens abandoning Ukraine to different parts of the globe, especially in neighboring Eastern European countries like Poland. Calculations highlighted that by April 13, 2022; more than 4.7 million Ukrainians had fled their country to find safety.
This massive diaspora has generated a growth in settlements with international payment systems, all due to the use by Ukrainian citizens of transactions.
These transactions got carried out mainly to avoid the current obstructions of the National Bank, particularly to investing abroad. Therefore, they should get interpreted as leading to unproductive capital outflows.
This type of operation includes the purchase of cryptocurrencies with UAH, the local currency, transfers to digital wallets, and transactions with foreign currencies. For these activities, people often use cards issued by Ukrainian banks to account for national currency outside the nation, primarily to acquire goods and services.
The preceding situation causes an increase in the volumes of foreign currency purchases by Ukrainian banks for settlements in international payment systems. This situation creates additional pressure on the foreign exchange market.
According to the National Bank of Ukraine, pressure levels reached a critical level, considering the millions of citizens forced to flee the area temporarily.
The Purchase of Bitcoin got Banned Shortly after its Legalization
The ban on the purchase of bitcoin, using the local currency of Ukraine, happened just over a month after the digital asset got legalized.
On March 16, President Volodímir Zelenski activated the Law on Virtual Assets, bringing legal back-up to bitcoin and other digital assets. This event took effect within the framework of the flow of donations in crypto assets that the government kept receiving to deal with the armed invasion executed by Russia.
Legalization gave origin to the massive use of bitcoin in the Ukrainian region. The authorities used digital assets to strengthen many of their financial activities, including those linked to the current war in their territory.
For their part, those citizens abandoning Ukraine have the alternative of taking their bitcoins with them when crossing the
By: Jenson Nuñez
