The NBU will conduct open testing of the e-hryvnia

The NBU will conduct open testing of the e-hryvnia

The National Bank of Ukraine is planning to implement a pilot project to launch its own digital currency – the e-hryvnia.

This was announced by the NBU.

"Currently, we are planning for the pilot project to be conducted in 2025, but there are a number of factors that may affect changes to this timeline.

In particular, it is necessary to consider the readiness of financial market participants to engage in the pilot, as well as to select a technological partner who will provide their technological solution for testing the e-hryvnia, which will meet the requirements of the National Bank and the architecture of the e-hryvnia, and to configure the relevant infrastructure," the regulator notes.

Testing of the e-hryvnia will be conducted in an open environment with real users and payment service providers. This means that anyone who wishes to use the electronic form of the hryvnia will be able to do so. The e-hryvnia will be based on DLT (Distributed Ledger Technology).

"The aim of the pilot is to test the e-hryvnia to determine the technological perspectives of performing the functions of money, satisfying the needs of users of payment services, and testing hypotheses regarding programmability," adds the National Bank.

What are digital currencies?

The e-hryvnia is the Ukrainian equivalent of a central bank digital currency (CBDC). It is a third form of money that will exist alongside cash and funds in bank accounts (non-cash). Unlike the latter, electronic money will not require intermediaries (such as banks or non-bank financial institutions) and will be direct liabilities of the central bank (like cash), although they will exist in digital form.

A feature of CBDCs is the ability for central banks to program them. For example, these funds can be set up to purchase only certain types of goods or pay for only a defined list of services.

In Ukraine, programs of economic support in the form of targeted payments have been implemented multiple times (for example, eSupport). Currently, such "programming" is achieved by imposing restrictions from banks, which are placed on special accounts where targeted payments are made.

Another example of CBDC programming is the ability to set a certain interest rate on the balance of funds. For instance, this way, the central bank can incentivize people not to spend immediately, which can reduce inflationary pressure. Conversely, the central bank can program the money to disappear after a specific period to encourage people to make purchases more actively and support economic growth.