Volodymyr Zelenskiy signed the law on the digital hryvnia

Ukraine has become one step closer to the creation of a CBDC. The President of Ukraine has signed a new law that will allow the National Bank to launch its own digital currency. The official page of the presidential administration stated that with the adoption of the law, it will also be possible to create a regulatory sandbox, develop the financial services market and introduce innovations in the economy. The change in legislation will tighten the rules for the crypto industry, while laying the foundation for the OpenBanking ecosystem. In addition, the requirements for banking institutions regarding internal capital and risk management are being tightened, the powers of the National Bank are expanding, which should stabilize the banking sector and improve the quality of service. The new law is called "On Payment Services" and was signed by the President on July 30. The Verkhovna Rada adopted this draft bill on June 30, 2021 with modifications by the Ministry of Digital Transformation. Earlier, the NBU conducted a survey on the e-hryvnia among business and finance experts and determined the directions for its use. 

The Digital Hryvnia Law states:

1. With the help of the project, Ukrainian laws will become more adapted to EU legislation, which contributes to the integration of the payment system with the European one. The law on cryptocurrency in Ukraine is based on the criteria of European regulatory acts.
2. The Central Bank of Ukraine will receive permission to issue "digital currency of the National Bank of Ukraine". A platform for testing services for payments will be created, which implies close interaction between the authorities and companies. The concept of CBDC is formulated as “an electronic form of the monetary unit of Ukraine, the issuer of which is the National Bank”. The digital hryvnia is considered to be the same legal means of payment as the usual one.
3. The Cryptocurrency Law of 2021 provides consumer protection. The requirements for user identification have been established.
4. New participants in the payment market will appear. Payment services can now be obtained even from postal or mobile operators. Non-banking institutions will be able to open money accounts, issue electronic money, and make transfers.
5. It will be possible to launch the concept of OpenBanking, which is planned to be launched in 2033.
6. Responsibility for illegal actions in order to prevent cyberbullying is being strengthened.

The document defines the concepts of "national digital currencies" and "electronic money", differentiating them from each other.

Financial institutions are forced to comply with anti-money laundering legislation. In order for a client to open an account or send a money transfer, he must provide his personal data. The KYC (Know Your Customer) requirement is aimed at restricting activities related to the legalization of proceeds from crime. A year earlier, Ukrainian legislators approved the law “On Virtual Assets”, which is designed to regulate cryptocurrency transactions in the country, designating these assets as an intangible benefit. Crypto assets, as a form of value transfer, are subject to the requirements of AML legislation.

Regulation of the crypto industry can not only limit the freedom of action of market participants, but also stimulate its development in the long term, providing Ukrainian crypto companies with access to banking services and protecting the rights of users. Thanks to the novelty of the industry, Ukraine will be able to adequately compete with other countries. So far, few of the cryptocurrency exchange services have introduced additional requirements for customer identification in advance. Those who have not done this will face major changes in their work in order to remain in the legal field.