NBU Unveils E-hryvnia Concept to Payment Market and Virtual Asset Market Participants

The National Bank of Ukraine has presented for discussion and feedback a concept of the e-hryvnia – the NBU digital money – to representatives of banks, nonbank financial institutions, and the virtual asset market.

The e-hryvnia is an electronic form of the currency of Ukraine that will be the NBU’s direct liability. According to the regulator, the key purpose of the e-hryvnia is to effectively perform all functions of money and to supplement cash and noncash forms of the hryvnia. The e-hryvnia should be easy to use and accessible to all population groups, legal entities, state authorities, banks, and financial institutions.

As previously reported, in September 2021, the NBU launched the E-Hryvnia Project in order to determine the need for a full-scale issue of the Ukrainian digital hryvnia based on the conducted research.

“The development and implementation of the e-hryvnia can become the next step in the evolution of Ukraine’s payment infrastructure, advance the digitalization of the economy, further promote cashless settlements and reduce their price, improve transparency of settlements, and boost overall confidence in the national currency. This can have a positive impact on ensuring the economic security of the country and strengthening the monetary sovereignty of Ukraine and the NBU’s capability to maintain price and financial stability as a foundation of stable economic growth,” said NBU Deputy Governor Oleksii Shaban.

During the discussion with the participants of the markets noted above, the NBU also presented a possible design of the e-hryvnia, its architecture, features, and advantages for payment service providers.  In particular, the use of a technology platform for making instant e-hryvnia settlements, programming services, and analyzing data flows will create wide opportunities for the development of new business cases, digitalization of services, attraction of new clients, optimization of costs, and more.

When designing the e-hryvnia concept, the regulator took into account the findings of a survey of the financial market experts on the demand for the e-hryvnia (conducted by the NBU in 2021), global best practices in designing the central banks’ digital currencies, and its own research.

At present, the NBU is considering and processing the following possible options for using the e-hryvnia that will be factored into its design and main features:

1. in retail noncash payments with the possible use as “programmed” money: for paying out targeted social benefits, reducing government spending on the administration and control of the targeted use of funds, and using smart contracts technology to program various settlement logic models, depending on specific circumstances or facts.
2. in the circulation of virtual assets (for instance, in the exchange and issuance of virtual assets, and in other transactions with these assets). The e-hryvnia can become one of the key elements of the development of quality infrastructure for virtual assets in Ukraine.
3. for provision of possibilities for cross-border payments: to expedite them, cut their costs, and increase their transparency.

The NBU continues to work on the draft concept of the e-hryvnia with participants of the payment market, the virtual asset market, and the state authorities. 

As a result of such work, the NBU will design an e-hryvnia concept that will comprehensively take into account the interests and needs of market participants and potential users.

At the same time, the NBU, like most of the world’s central banks, will take a balanced approach to issuing its own digital currency, in particular by taking into account a potential impact of its implementation on the country’s financial system.