What is E-hryvnia and why is it needed?

Why do we need electronic money?

Electronic money has a number of important advantages and brings significant benefits in the modern world of financial transactions. Here are a few key reasons why they are so important:

• Convenience and availability. Electronic money provides simplicity and convenience in conducting financial transactions. With their help, you can make payments and transfers via the Internet, mobile devices and other electronic communication channels. This saves time and effort by making transactions available anytime, anywhere.
•  Security and protection. Payments using electronic money provide an increased level of security. Encryption and authentication technologies protect data and financial transactions, minimizing the risk of fraud and unauthorized access.
• Speed ​​and efficiency. Electronic money allows you to make instant payments and transfers, speeding up the process of settlements and exchanging funds. They contribute to faster and more efficient work in various areas, including international transactions and corporate payments.
• Development of the digital economy. In the era of digital transformation, electronic money plays an important role in the development of the digital economy. They are driving online commerce, digital payments and innovative financial services, opening up new opportunities for businesses and consumers.
• Financial inclusion. E-money promotes financial inclusion by providing access to financial services for those previously excluded from traditional banking. They allow people without bank accounts or credit histories to receive and send payments, receive salaries and benefits, and manage their finances securely.

Electronic money plays an important role in improving the financial sector, increasing the convenience of payments and money exchange, as well as expanding access to digital services for everyone.

Currently, central banks around the world are actively exploring and considering the introduction of CBDC Central Bank Digital Currencies. This is a new generation of digital currencies, which are an electronic form of a national currency issued by a central bank.

More than 100 countries are already involved in the CBDC implementation process in various forms. Among them, 13 countries have already successfully launched their digital currencies, 17 countries are conducting pilot projects to study the functionality, 28 countries have implemented individual elements of the digital currency system, and 50 countries are actively exploring this issue, trying to realize the potential and opportunities.

This broad interest comes from central banks' awareness of the benefits of CBDCs, such as increased efficiency in payment systems, improved financial inclusion, cost and risk reduction, and the potential for new financial innovations. The introduction of digital money can have a significant impact on the global economy and financial system, opening up new perspectives and opportunities for all involved.

E-hryvnia - what is it?

The National Bank of Ukraine presented a new concept for the development of e-hryvnia, which is issued specifically for bank representatives and other legal institutions. As part of this concept, it is planned to create digital money that will be issued personally by the NBU. It is planned to hold discussions and meetings, involve interested parties in order to obtain feedback from them. Also discussed were design and architecture options for the digital hryvnia, key characteristics and main positive aspects of the currency in the context of payment transactions and services.

The e-hryvnia bill represents a digital version of the monetary unit of Ukraine, which will be fully regulated by the National Bank. The main goal of this project, according to the regulators, is to effectively perform the same functions that are typical for the usual national currency, while adding the hryvnia to the existing forms of payment - cash withdrawals and non-cash. For the successful integration of the electronic hryvnia into the modern economy, it is necessary to ensure maximum convenience and accessibility for all citizens, including individuals and legal entities, government agencies, banks, financial enterprises and non-banking financial institutions.

Options for using e-hryvnia?

Currently, the National Bank of Ukraine is actively researching and developing various promising scenarios for the potential introduction of the electronic hryvnia.

• Crypto hryvnia is a completely innovative financial instrument for retail payments in the country. It promises to be an alternative to traditional methods such as using cash, payment cards and visiting bank branches. E-hryvnia has a wide range of advantages, including reliability, which is guaranteed by the National Bank of Ukraine itself. It also provides fast transaction processing, a high level of security, availability and transparency. Crypto hryvnia promises to be the most comfortable tool for making conversions. As a result, it can bring significant benefits to both ordinary people and businesses.
• The electronic hryvnia demonstrates cutting-edge technology that ensures security, transparency and efficiency when dealing with digital currencies. It allows users to quickly and conveniently convert various assets: cryptocurrencies, tokens and other electronic resources.
• Cryptographic hryvnia is a unique tool for making payments both within the country and abroad. It opens up new possibilities for secure and instant transactions when using new virtual currencies. This creates new prospects for global trade and transactions involving digital assets between countries, simplifying and speeding up the process of international tranches.
• In addition, the NBU e-hryvnia has the potential to become an important component for social payments. The government has the right to use the new hryvnia to pay for the social needs and benefits of many citizens, providing the functionality of digital money that can only be used for certain plans or at certain times. This makes it possible to control and effectively use social funds, eliminating the possibility of their misuse or abuse.
• The electronic hryvnia is an innovative tool that significantly speeds up and simplifies settlement processes related to securities and financial instruments. One of the main features of this system is the possibility of direct payments through wallets, bypassing traditional banking and providing access to non-banking financial institutions. This approach reduces time delays and reduces costs, helping to improve the efficiency of financial processes and reduce transaction costs for all market participants.
• E-hryvnia and digital infrastructure are an effective tool for facilitating corporate payments between companies. They provide fast and efficient "wholesale" transactions between financial institutions within the country, reducing risks and increasing transparency in corporate financial transactions. The use of e-hryvnia provides corporate entities with more efficient and convenient payment methods, contributing to the optimization of financial processes.

The NBU is actively exploring these options for using the e-hryvnia to determine their potential and applicability in the Ukrainian economy.

Positive and negative aspects of the e-hryvnia

Positive aspects of the e-hryvnia:

• Ease of use. E-hryvnia is a digital form of money, which makes it convenient for online transactions, e-commerce and mobile payments. Such use can simplify the shopping and payment process for citizens and businesses.
• Low fees and instant transactions. Using e-hryvnia can reduce transfer and transaction fees, especially when compared to traditional methods such as bank transfers. In addition, transactions with e-hryvnia can be carried out almost instantly, which increases the speed of payment processing.
• Safety. Based on blockchain technology, the e-hryvnia provides a high level of security and protection against counterfeiting and fraud. This approach helps to increase user confidence in digital currency and reduces the risks associated with financial transactions.

Negative sides of the e-hryvnia:

• Technical infrastructure requirements. The introduction of the e-hryvnia requires a modern technical infrastructure, including access to the Internet and mobile devices. This can create barriers for those who do not have access to the relevant technologies or do not have the necessary skills to use them.
• Vulnerability to cyberattacks. Digital currencies are subject to the risks of cyberattacks and cybercrime. In the event of a successful hack or theft of an e-wallet, users may lose their funds without the possibility of recovering them. This requires additional security measures and awareness on the part of users.
• Lack of physical appearance. Unlike banknotes and coins, the e-hryvnia has no physical representation. For some people, this can be an obstacle, especially for those who prefer or are accustomed to using traditional cash.
• Regulation and legal aspects. The introduction of the e-hryvnia may require changes in the legal and regulatory sphere, including taxation, consumer protection and control over financial transactions. These aspects require careful consideration and preparation in order to create an efficient and sustainable digital currency.

Outcome

E-hryvnia is not a cryptocurrency. At the moment, there is no official e-hryvnia either in Ukraine or in other countries. Cryptocurrencies such as Bitcoin or Ethereum, differ from traditional fiat currencies such as hryvnia dollar in that they are based on blockchain technology and are not controlled by a central bank or government. Cryptocurrencies have unique properties, including decentralization and anonymity.

In the event that Ukraine decides to issue its own blockchain-based digital currency, this could be considered as a form of cryptocurrency. However, at the time of writing, Ukraine has not implemented e-hryvnia or any other cryptocurrency as an official means of payment.

In general, e-hryvnia has the potential to improve the convenience and efficiency of financial transactions, but its implementation also comes with certain challenges that require attention and advance preparation.