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NBU to Continue to Look into Possibility of Issuing Its Own Digital Currency – the E-hryvnia

NBU to Continue to Look into Possibility of Issuing Its Own Digital Currency – the E-hryvnia

The National Bank of Ukraine will continue to look into the possibility of issuing its own digital currency, the e-hryvnia, based on the results of a pilot project that the central bank published in its Analytical Report on e-hryvnia.

As a part of this project, the NBU analyzed international experience, studied legal aspects and macroeconomic effects, and drew up optimal versions of business models for e-hryvnia circulation. 

Overall, a lot of regulators, including those of Sweden, Canada, China, Singapore, the UK and Norway, have recently been studying the possibility of issuing their own digital currencies*, together with ways of using these currencies. Although digital currency types and technologies vary depending on the objectives central banks pursue, in all cases digital currency is regarded as a new and evolutionary type of central bank money.

Together with theoretical studies, the NBU project also conducted case studies.  While testing a blockchain platform technology, the NBU issued a limited amount of e-hryvnias into circulation. Transactions involving e-hryvnias were tested by task forces consisting of NBU staff, volunteer companies, and World Bank experts, which provided advice to the NBU as technical assistance.

These tests yielded valuable results regarding the issue of digital currency. The key findings were as follows:

  • e-hryvnia could be an alternative to existing means and instruments for retail payments, such as cash, payment orders, payment cards, and e-money. The advantages of the e-hryvnia include ease of use, availability, security (repayments and payments are guaranteed by the NBU), and rapid payments.
  • Since the pilot project had a limited number of operations and users, and its transactions were small in number and volume, it could not fully assess the attractiveness and the potential number of users of this instrument. This makes it difficult to estimate the number of Ukrainians that will use the e-hryvnia if a decision to introduce it at the national scale is taken.
  • The e-hryvnia can be regarded as a so-called disruptive technology, as it has the potential to significantly reshape the ecosystem of the Ukrainian payment market and reassign the current roles of market participants.
  • While launching the e-hryvnia on the Ukrainian payment market, the central bank should also consider the possibility of introducing other innovative payment instruments, such as instant payments and new open banking instruments.
  • The launch of the e-hryvnia requires a great deal of investment, and time both to update payment infrastructure and to encourage users with set payment habits to use the new instrument.
  • There are two possible alternative models for e-hryvnia circulation: the centralized and the de-centralized ones.  Under the centralized model, the NBU will be the sole issuer of e-hryvnias, with commercial market participants performing only servicing (agent) functions. Under the de-centralized model, banks and non-bank financial institutions will be authorized to issue e-hryvnias under the NBU’s supervision. It should be noted, however, that e-hryvnias issued by commercial market participants will not be classified as central bank digital currency, and will be similar to e-money.
  • Blockchain (DLT) technology could be used as a platform through which e-hryvnias will be issued and on which they will circulate. However, the main advantages of this technology will not be available in the centralized model.

“Our study has not only provided us with practical experience, but also posed new questions for the NBU,” said NBU Deputy Governor Sergii Kholod. “How will this instrument affect the payment market ecosystem? Will there be sufficient demand for e-hryvnias from users, vendors, and market participants? What technology should we use? What level of anonymity should transactions involving e-hryvnias have? Today, not only the NBU but also other central banks have no clear answers to these questions.”

He added that the NBU would continue to look into the possibility of issuing e-hryvnias, taking into account the project’s findings, the current needs of the financial market, and potential economic development.

While studying global trends, the NBU will continue to cooperate and exchange experience of using digital currencies with other central banks and International Financial Institutions. Together with Ukrainian payment market participants, the NBU will continue to develop target business models for the e-hryvnia.

For reference:

The NBU launched its pilot project to consider the possibility of issuing its own digital currency, using blockchain technology, in May 2016. The case studies were completed by late 2018.

As part of the pilot project, the regulator studied how the e-hryvnia could complement Ukraine’s payment landscape, and help increase the share of cashless payments, while decreasing their costs.

In essence, the e-hryvnia is digital fiat currency**, which can be exchanged for cash or cashless money on a one-to-one ratio.

Transactions involving e-hryvnias could be carried out online, using a computer or a mobile device (such as a smartphone or a tablet), which are widespread on today’s market.


* Central bank digital currencies or CBDC.

** ordinary currency that is legal tender in a country.

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Analytical Report on the E-hryvnia Pilot Project
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