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Ukraine bans Bitcoin purchases with local currency as martial law takes effect

Ukraine DAO
Ukraine DAO

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The National Bank of Ukraine (NBU) is still taking measures to ensure no capital outflows following the negative economic effects caused by the Russian invasion. The country is now restricting cryptocurrency purchases amid the implementation of martial law.

Ukraine’s local currency has taken a plunge after Russia invaded the country. Cryptocurrency activities in the country have increased significantly over the past few weeks as people try to preserve the purchasing power of their savings.

Ukraine bans the use of local currency to buy Bitcoin

Ukraine’s central bank has announced a set of restrictions on cross-border payments. One of these restrictions involves barring individuals from purchasing cryptocurrencies such as Bitcoin using hryvnia, Ukraine’s local currency.

Ukrainians can only buy cryptocurrencies using foreign currency. The monthly limit for these purchases has also been set at 100,000 UAH, equivalent to $3300. The limit will also apply to global peer-to-peer transactions.

The National Bank of Ukraine has also said that cryptocurrencies are “quasi cash transactions” because they are similar to foreign exchange transactions or travel payments. These restrictions aim to limit the outflow of capital from Ukraine amid the implementation of martial law.

A statement from the NBU said that “the relevant changes will help improve the foreign exchange market, which is a necessary prerequisite for easing restrictions in the future, as well as reducing pressure on Ukraine’s international reserves.”

The central bank noted that there has been increased demand for international transactions since the implementation of martial law. However, the central bank added that “unproductive capital outflows” could not be afforded, including cryptocurrencies.

The National Bank of Ukraine also added that these changes were adopted as part of the board resolutions made on April 20. The restrictions went into effect on Wednesday.

The bank further explained that “Quasi cash transactions […] are mainly carried out to circumvent the current restrictions of the National Bank, in particular for investing abroad, which is prohibited under martial law. Therefore, the relevant transactions should be interpreted as leading to unproductive capital outflows.”

Change already taking effect

Some banks in Ukraine have already adopted these changes and are restricting local crypto purchases. The largest commercial bank in Ukraine, PrivatBank, barred its customers from buying Bitcoin with the hryvnia in mid-March.

The new restrictions have raised concerns, given that the Ukrainian government had announced plans to create a legal framework for cryptocurrencies. Last month, President Volodymyr Zelensky signed a law to create a legal framework under which cryptocurrencies will be regulated.

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