Ukraine bans buying Bitcoin in local currency amid martial law

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2022-04-28 13:36:42

The National Bank of Ukraine (NBU) continues to take measures to prevent capital outflows amid martial law by enforcing major restrictions on cryptocurrency purchases.

Ukraine’s central bank officially announced on Thursday a series of restrictions on cross-border activities, barring individuals from buying cryptocurrencies like Bitcoin (BTC) with the country’s fiat currency, hryvnia. (UAH).

Ukrainians are currently only allowed to buy Bitcoin and other cryptocurrencies in foreign currencies, with total monthly purchases capped at 100,000 UAH ($3,300). The relevant limitation also applies to international P2P transactions.

According to the announcement, the NBU has deemed cryptocurrency purchases a “cash equivalent transaction” along with activities such as e-wallet deposits, foreign exchange transactions, and travel payments. By imposing restrictions on such transactions, the central bank aims to prevent “inefficient capital outflows” from the country amid martial law.

“The relevant changes will help improve the foreign exchange market, which is a necessary precondition for future easing of restrictions, as well as to reduce pressure on Ukraine’s international reserves,” the NBU wrote.

The central bank acknowledged that the demand for international transactions has increased massively amid martial law, with millions of citizens forced to leave Ukraine. However, the NBU cannot tolerate “inefficient capital outflows,” including investing in cryptocurrencies, the notice noted, adding:

“Cash Equivalent Transactions” […] mainly done to circumvent the existing restrictions of the National Bank, especially for offshore investment, which is prohibited by martial law. Therefore, the transactions involved should be construed as leading to inefficient capital outflows.”

According to the NBU, the Ukrainian government adopted the relevant changes as part of the NBU board resolution from April 20, 2022, which came into effect on Wednesday.

Some Ukrainian banks have adopted such restrictions, according to several sources. PrivatBank, the largest commercial bank in Ukraine, reported that it banned its customers from buying BTC with UAH in mid-March.

The restrictions seem to raise many doubts as the Ukrainian government is actively working to legalize cryptocurrencies amid martial law. In March, Ukrainian President Volodymyr Zelenskyy signed a law that aims to establish a legal framework for the country to operate the cryptocurrency market.

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