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Ukranians move to crypto, losing faith in the financial system

Ukraine's central bank is cracking down on digital money transactions.

As Ukraine tightens restrictions on cash-transfer routes and Moscow unleashes airstrikes and ground forces, some Ukrainians are turning to cryptocurrency. We don’t have faith in the government. ” We don’t have faith in the financial system. “We don’t trust the local currency,” Michael Chobanian, the founder of Kuna, said in an interview that “the vast majority of individuals have no other option but to invest in cryptocurrency.”

According to Kuna, a major Ukrainian cryptocurrency exchange, domestic purchasers are paying a premium for Tether’s USDT stablecoin, which is tethered to the value of the US dollar. Tether, with a market cap of nearly $80 billion, is the most popular stablecoin by market cap, and unlike cryptocurrencies like bitcoin and ethereum, which have experienced significant volatility in recent weeks due to rising geopolitical tensions, tether, like other stablecoins, is generally fairly stable in value.

However, because of growing demand, the current exchange rate for 1 USDT is around 32 Ukrainian hryvnia (the national currency), or $1.10. The National Bank of Ukraine has instructed electronic money (e-money) issuers to halt e-money issuance and e-money replenishment of electronic wallets. The written ruling further said that e-money distribution was temporarily prohibited.

The term “electronic money” most likely refers to fiat currency maintained in digital accounts via services such as Venmo or PayPal.

This is one of several new limitations imposed by the country’s central bank as Russian armies lay siege to Ukraine. On Thursday, the National Bank of Ukraine issued a statement including a slew of resolutions, including an order suspending the foreign exchange market, limiting cash withdrawals, and prohibiting the issuing of foreign currency from ordinary bank accounts.

Ukraine’s officials have been working for months to promote the country as a digital currency haven. In 2021, President Volodymyr Zelenskyy approved legislation allowing the country’s central bank to create its own digital currency, and the president and parliament just agreed on legislation to legalise and regulate cryptocurrencies.

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Vaishali Goel
Technology enthusiast, explorer and academic scholar. Currently exploring the crypto world. Join me in my journey to see how crypto, NFT and Metaverse will change the world.
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