By Shelly Melancon (Switzerland)
As predicted, central bank digital currencies (CBDCs) are gaining attention. A new Ukraine bill entitled ‘On Payment Service’ has been signed into law by Ukraine’s President, Volodymyr Zelenskyy. The bill will empower the apex bank in the country with sole and exclusive right to release a CBDC. With the latest development, Ukraine adds itself to the list of countries embracing this type of digital currency.
The president’s assent makes the bill effective. As such, the National Bank of Ukraine (NBU) will work closely with private businesses in the country’s payment industry to address the needs of the private sector. In view of the new legislation, Ukraine’s apex bank is charged with setting up frameworks for piloting payment systems and instruments in relation to new technologies.
As per the new legislation, the CBDC will be known as the digital hryvnia, the non-physical version of the country’s fiat currency. It is no different from the names other apex banks in various regions have been giving their CBDCs of late. For instance, China’s CBDC is called the Digital Yuan.
New Legislation Advocates for Synergy Between Banks and Privately-owned Firms
The bill was passed by the Ukraine Congress towards the end of June. Other provisions of the ‘On Payment Services’ legislation include the integration of an open banking system, access to users’ data via platforms outside the bank. The new legislation is also aimed at encouraging a synergy between privately-owned fintech firms while providing them with an opportunity to thrive and enabling innovations in the country.
Also read:According to reports, the new legislation has been structured in accordance with the legal infrastructure provided by the European Union, such that Ukraine can easily incorporate its payment service into the EU’s. Also, the legislation is guided by the contemporary guidelines and criteria of the European Union’s regulatory acts.
European Union Eyes Digital Euro
On its part, the European Union is also looking at introducing a cross-border CBDC for member states. The European Central Bank has been taking active steps on a Digital Euro. However, the ECB’s president, Christine Lagarde noted that a Digital Euro may likely take four years to be released. In a report in June, the bank also considered the implications of releasing a CBDC, where it noted privacy releases are the most notable challenge to a Digital Euro issuance.
It has been on the bucket list of the National Bank of Ukraine to release a CBDC, highlighting the essence of the CBDC to consolidate the trust of the Ukraine population in the bank and its offerings. On the other hand, the apex institution has also considered the cons of a CBDC, which mostly bordered on risks to the country’s financial system.
As CBDCs continue to surface in different regions, a number of regions are looking at transborder payment systems using CBDCs. Singapore has successfully completed a piloting program. In the race to the issuance of CBDCs, China and its Digital Yuan is dominating.
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