Despite considerable testing and research, the prospect of a central bank digital currency (CBDC) still raises great concerns for bankers in Ukraine.
At a February 21 conference in Kiev, the National Bank of Ukraine (NBU) presented the results of testing its CBDC project, the e-hryvnia, and noted that the bank continues to seek the issuance of its own CBDC.
However, the central bank apparently still worries about the effect of such a currency on financial stability and the potential threat to the traditional banking system. An official announcement by the NBU states:
“The banking system can cease to be an important financial intermediary if the majority of the population switches to using the digital currency of the central bank instead of cash and bank accounts. On the one hand, inflation levels in the country will not be significantly affected, as digital currencies will be issued by central banks, which will control this process. “
At the same time, the NBU noted that a CBDC has the potential to strengthen public confidence in the central bank and its financial services. The central bank listed important benefits such as reliability, convenience and the ability to tackle the ‘shadow economy’. The announcement notes:
“In contrast to bank accounts, money from central banks is completely risk-free and 100% guaranteed by the state. In other words, it is not only useful but also reliable. In addition, digital currency can help reduce the amount of paper money in circulation. For many countries this is an urgent task, because the shadow economy is often ‘fed’ with paper money. “
Although there are a number of potential benefits for the e-hryvnia, the NBU does not seem to prioritize it at this time. Bank Governor Jacob Smol concluded that the authority will return to the e-hryvnia issue once the bank is convinced that such projects do not pose a threat to financial stability. The official tweeted:
“We have completed the pilot project, but we will continue to look at the chance of e-hryvnia. We will come back to this when we are convinced that it is not only technologically feasible, but also that it does not disturb price and financial stability.”
In 2016, after the NBU began investigating the possibility of issuing its own digital currency, the bank completed a pilot for the e-hryvnia project. According to the official NBU announcement, the central bank issued a “very limited number of hryvnias” within the pilot – just over 5,000 e-hryvnias, worth about $ 200 at the time of printing.
Olga Vasileva, deputy head of the NBU’s payment networks and the innovative growth department, sketched that e-hryvnia is nothing more than a digital alternative to cash. The director said that a CBDC such as the e-hryvnia is especially interesting for an ordinary user because of the low costs and speed of financial transactions.