Ukraine’s newly signed law On Payment Services requires close cooperation between the National Bank of Ukraine and private startups in the payment market.
The Ukrainian government is moving forward with its central bank digital currency (CBDC) plans, as the National Bank of Ukraine (NBU) is now officially authorized to issue a digital currency.
Ukrainian President Volodymyr Zelenskyy has signed a law titled On Payment Services, officially enabling the country’s central bank to issue a CBDC, the digital hryvnia, according to a Thursday announcement.
The new law authorizes the NBU to set up regulatory sandboxes for testing payment services and instruments based on emerging technologies. The new legislation also requires close collaboration between the Ukrainian central bank and local startups in the payment market, taking into account the demand of the private sector, the announcement reads.
Initially approved by the Ukrainian parliament in late June, the On Payment Services aims to provide the implementation of open banking, the practice of sharing access and control to consumer financial information through third-party applications. The law is expected to stimulate the development of financial technologies in the country, allowing private fintech companies to establish cooperation with banks and have more business opportunities.
Among other intentions, the newly signed law is also designed to adapt the Ukrainian legislation to the legal framework of the European Union, which would eventually allow integrating the country’s payment system with the one of the EU, the announcement notes. The legislation is based on modern requirements and takes into account the standards of European regulatory acts, including the Payments Service Directive 2 and the E-Money Directive.
As previously reported, the NBU has been closely looking into issuing a digital currency over the past several years, outlining the potential of a CBDC to strengthen public confidence in the central bank and its financial services. However, the bank remained largely concerned about potential related risks like its impact on financial stability and possible threats to the traditional banking system.
Earlier this year, Ukraine’s Ministry of Digital Transformation entered into a partnership with the Stellar Development Foundation to jointly develop a strategy for digital assets and CBDC infrastructure.