The National Bank of Ukraine (NBU) has revealed its draft concept for developing a central bank digital currency (CBDC) known as the digital hryvnia or the e-hryvnia.
The banking regulator noted in its concept document that the digital hryvnia will effectively perform all the functions of money while “supplementing the cash and non-cash forms of the hryvnia.” The NBU opined that in order for the CBDC to perform its functions, it will have to be open to every demographic in the country, including banks and non-banking financial institutions.
The document postulated three possible options for the design of the CBDC currently considered by the NBU. The first option is using the e-hryvnia “for retail non-cash payments with the possible functionality of programmed money,” which the banking regulator says will reduce government expenditures.
Under the second option, the NBU is looking to deploy the CBDC in the circulation of digital assets. The central bank suggests that under this option, “e-hryvnia can become one of the key elements of qualitative infrastructure development for the virtual assets market in Ukraine.
The last option under consideration by the NBU is its usage in facilitating cross-border payments, an option that several central banks, including the Bank of Russia. NBU notes that it will adopt a slow-and-steady pace in developing its CBDC while considering the potential impact it could have on the country’s financial system.
“The development and implementation of the e-hryvnia can be the next step in the evolution of the payment infrastructure of Ukraine,” said Oleksiy Shaban, Deputy Chairman of the NBU.
In October, the NBU trademarked the “e-hryvnia” with the Ukrainian Intellectual Property Institute. Plans for the development of the CBDC have been underway for some time, with the central bank hiring distributed ledger technology (DLT) developers to work on the e-hryvnia project while collaborating with the Stellar Development Foundation.
CBDC development heats up
Central banks worldwide are picking up the pace of developing digital versions of their national currencies. These central banks are buoyed by the need to prevent the “cryptoization” of their economies due to the rising adoption of digital currencies.
China’s digital yuan has emerged as the most anticipated CBDC, given the impressive results of its pilot. By October 2022, the digital yuan had crossed transaction volumes exceeding the $14 billion mark in over 300 million transactions. Figures from the People’s Bank of China (PBoC) reveal that over 5.6 million merchant stores have provided support for the digital yuan while multiple government platforms have begun supporting both offline and online payments.
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