Ukraine, despite the absence of legislative regulation of the cryptocurrency market and the blockchain technology, is developing two digital assets based on the latter. From 2016, the National Bank of the country launched a research project on the introduction of e-hryvnia (e-hryvnia), and the Kuna cryptocurrency exchange began in August 2017 to develop a national steybcocoin under the working title Cryptogravna. BlockchainJournal magazine has figured out a special material, what is the difference between these assets and whether it is time for digital experiments on the economy of Ukraine.
Electronic Hryvnia from the NBU
The first steps to introduce the e-hryvnia – the national currency of Ukraine in digital form – were made at the end of 2016. Then the National Bank, together with leading Ukrainian blockchain specialists, began to study the international experience, risks and advantages of existing technological solutions for the country's financial ecosystem.
The NBU experts say that the e-hryvnia developed by them will allow the state and business to minimize the costs of money transfer, as well as conduct instant operations.
A pilot project for testing an innovative payment solution as part of the Cashless Economy project launched by the National Bank was launched in June 2017. In addition to the National Bank team, interested participants of the payment market were attracted to it on a voluntary basis. The legal aspects, the macroeconomic effect were investigated and the optimal business model of the new digital asset was designed.
In January 2018, the NBU clarified that the e-hryvnia will not be a “cryptocurrency from the National Bank”, but a regular payment token .
According to the adviser to the head of the Association of Ukrainian Banks, Aleksey Kushch, the electronic hryvnia will be in bank accounts, but will be counted on an electronic wallet, and the blockchain will protect it from fraud, hacker attacks and illegal withdrawal from accounts. He also stressed that the e-hryvnia will become the obligation of the National Bank , which can be bought for cash.
In an exclusive commentary to the BlockchainJournal magazine, representatives of the NBU confirmed that they continue to study how the electronic hryvnia can complement the payment landscape of Ukraine and help increase the share of cashless payments and reduce their value.
“The electronic hryvnia is a fiat currency in electronic form, which is exchanged for cash or non-cash funds in a ratio of 1: 1. E-hryvnia transactions can be carried out using a computer or smartphones,” the NBU reported.
Now the National Bank is completing a pilot project on electronic hryvnia: the technological part is almost complete, work is underway on analytics. According to preliminary estimates, the pilot project for e-hryvnia should be completed in December 2018.
“We emphasize that the decision on the feasibility of introducing an electronic hryvnia will be made only after a detailed analysis of the developments and results of the pilot project and an assessment of the interest of consumers and participants in the payment market in such a product,” the National Bank noted.
Kuna cryptogravna
In August 2017, Mikhail Chobanyan, the founder of the Ukrainian cryptocurrency exchange Kuna, proposed an alternative national cryptocurrency project under the working title “cryptogrivna”. Then it was reported that the open-source project will allow to build expertise "to launch a national cryptocurrency from a national bank."
In November 2018, Kuna completely revised the legal model of his token, which had previously been supposed to provide hryvnia with stocks of traders on the personal wallets of the exchange.
“We left this concept because it is not scalable and legal persons cannot participate in it. In addition, we need physical persons who can send money from their current bank account, because there are no restrictions on the card, ”said Mikhail Chobanyan.
As representatives of the Kuna team told BlockchainJournal magazine, cryptogrivna will be the first Ukrainian steyblcoin that will level the risk of price volatility. In addition, binding to the hryvnia exchange rate, according to them, will be “more understandable” to the market.
At the first stage, the token will work on the Ethereum platform (ERC-20 standard). The emission mechanism and its scope will be disclosed in the public offer and the whitepaper of the project at the time of launch.
“Cryptographic will have properties of different types of tokens, depending on the transaction in which it will be applied. In making payments, the properties of the payment token, in the possibility of obtaining additional services for coin holders, utility. In certain transactions, cryptogravna will be a security token, ” the exchange team said.
Unlike e-hryvnia, cryptographic will receive a wider scope. The new token will have similarities with the Swiss coin WIR, released in 1934, which makes it possible to carry out mutual settlements, as well as a tool for mutual lending and securing the obligations of the system participants.
“Cryptogravna can be used as an alternative to traditional means of payment: in online purchases, escrow, when issuing loans, thereby reducing the amount of cash payments. Also, the token will be a full-fledged exchange tool on the crypto market and the instrument of exchange trading. In addition, cryptogrivna will allow beginners to enter the cryptographic via the digital currency understandable to them, without immediately entering through other altcoins, ”the developers said.
Initially, cryptogrivna will be traded on the Kuna Stock Exchange, then its listing will be possible on any other exchanges and exchangers.
Representatives of Kuna stressed that the release and turnover of the token will be carried out within the legal field, and the coin itself will be able to function even before the adoption of the law on the regulation of cryptocurrencies.
“All service providers in the chain whose activities are regulated have the necessary licenses,” they assured.
Now the model is at the final stage of development, after which it will pass a stress test in law firms.
It is expected that the full commercial operation of the token will begin in 2019. During the year after its launch, Kuna expects to attract UAH 1 billion.
Positive experiment for the economy of Ukraine
Both projects of national digital assets will find their consumers and be able to become competitive, the lawyer, managing partner of the law firm Juscutum Artem Afyan is convinced.
“E-hryvnia and cryptogrivny can have very different target audiences, different areas of application, different pros and cons. The project of electronic hryvnia has been developed by the National Bank for a long time. Periodically, it is transformed, the technological background is changing, the possibilities of using the blockchain, crypto-encryption to ensure the stability and greater comfort of this money are analyzed. But, anyway, what the National Bank does is initially a kind of hryvnia, some form of existing money.
What Kuna does is a completely different, new kind of digital asset.
Before the cryptogrivna has acquired a specific shape, I will for the time being refrain from assessing the financial side. But this tool does not enter into direct competition with what the National Bank is doing, and it seems to me that it may well occupy its own separate place in the country's economy. Cryptographic has a much smaller legal framework, but it makes it more flexible and, therefore, more interesting, ” Afyan said in a comment to BlockchainJournal.
At the same time, the expert stressed that both the first and second projects need additional explanations from the regulator regarding licensing and procedures for their application in the banking sector. Depending on this, it will become clear whether an additional regulatory framework is needed for their operation.
In general, Artem Afyan positively assessed the prospects for creating national digital assets in the country.
“The Ukrainian economy is experiencing so many depressive factors that these two projects will not have any negative effect. Will they be positive – probably, yes. In itself, the consciousness of market participants is quite ripe. Moreover, it is in a developing economy that it is much more convenient to introduce new formats of payment instruments, ”believes Artyom Afyan.
Obviously, it’s too early to talk about the practical results of the development of the national token, but the successful implementation of at least one of the digital assets based on the DLT technology will allow Ukraine to remain among the world leaders in implementing the blockchain.
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