Ukraine’s president signs new law allowing issuance of CBDC
It is official! The president of Ukraine has finally signed a new law that allows its Central Bank to issue its own digital currency as a cash equivalent
- The Ukrainian government has made its plans for a central bank digital currency (CBDC) legal barely a month after the law was initially passed by the Ukrainian parliament
- The NBU can now create regulatory sandboxes to test payment services and instruments based on emerging technologies
- Both the Ukrainian central bank and local startups in the payments market are required to collaborate based on the new legislation
The Ukrainian government officially joins the list of other countries to officially legalize the issuance of central bank digital currency (CBDC). As stated in an announcement on the presidential website, the President of Ukraine, Volodymyr Zelensky signed the bill that was passed barely one month by the Ukrainian parliament into law on Friday.
While the new law is titled “On Payment Services,” it seeks to create an open banking system that allows third-party applications to share access and control of users’ financial information. On the other hand, the project is expected to modernize and develop the payment service industry, as well as contribute to the introduction of innovations in Ukraine’s financial sector.
More so, the legislation further increases the protection of payment service consumers’ rights and ensures that their provision is transparent. Specifically, the legislation establishes new rules for risk management and user authentication.
Giving the complex nature of the project, the National Bank of Ukraine (NBU) has been authorized to be in charge of the issuance of the digital currency – the digital hryvnia.
Additionally, the central bank is also permitted to set up a regulatory sandbox to conduct a test run of the payment service based on new technologies as part of its authorization to issue CBDC. In addition, the NBU and local payment startups will be required to collaborate under the new legislation.
The new CBDC legislation only defines 9 payment service
According to the presidential announcement, “only nine-category of payment service providers will be defined in Ukraine.” Among them are two non-financial services which are responsible for initiating payment transaction and services to provide information on accounts.
Also covered in the new legislation are non-bank payment services such as payment institutions, e-money institutions, postal operators, and other payment service providers. While they will be allowed to open payment accounts, issue payment cards, and e-money, they are not required to participate in a payment system to make transfer.
Finally, payment service providers are required to employ strengthened user authentication in some situations to reduce cyber fraud while ensuring accountability for illicit conduct with payment instruments. The new legislation according to the official announcement, is expected to come into effect 12 months later from the time of announcement.