Preventing Capital Outflow, Ukraine Restricts Purchases Of Cryptocurrency

The Ukrainian government has been forced to limit purchases of cryptocurrencies. (photo; doc. pixabay)

JAKARTA - The National Bank of Ukraine (NBU) continues to take steps to prevent capital outflows amid martial law by imposing major restrictions on purchases of cryptocurrencies.

Thursday, April 21, Ukraine's central bank officially announced a series of restrictions on cross-border operations, prohibiting individuals from buying cryptocurrencies such as Bitcoin (BTC) with the national fiat currency, the hryvnia (UAH).

Ukrainians are now allowed to buy Bitcoin and other cryptocurrencies with foreign currency only, with total monthly purchases capped at 100.000 UAH. The relevant limits also apply to international peer-to-peer transactions.

According to the announcement, the NBU has considered crypto purchases to be “quasi-cash transactions” alongside operations such as e-wallet deposits, foreign exchange transactions, and travel payments. By imposing such transaction restrictions, the central bank aims to prevent “unproductive capital outflows” from the country in the midst of martial law.

"Relevant changes will help improve the foreign exchange market, which is a necessary prerequisite for easing future restrictions, as well as reducing pressure on Ukraine's international reserves," the NBU wrote, as quoted by Cointelegraph.

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recognizes that the need for international transactions has increased massively amid martial law, with millions of citizens forced to leave Ukraine. However, the NBU cannot pay for “unproductive capital outflows”, which include investments in cryptocurrencies.

“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,” the NBU said.

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

Several Ukrainian banks have adopted such restrictions, according to several sources. PrivatBank, Ukraine's largest commercial bank, reportedly banned its customers from buying BTC in UAH in mid-March.

The restrictions seem to be a cause for concern as the Ukrainian government has been actively working to legalize cryptocurrencies amid martial law. In March, Ukrainian President Volodymyr Zelenskyy signed a law to establish a legal framework for the country to operate a regulated crypto market.