Ukraine forbids its Citizens to buy Crypto in Local Currency

Ukraine is currency under martial law. The government has banned cryptocurrency purchases in the local currency perhaps to check the depleting local currency value. Earlier Ukraine had adopted a crypto-friendly stance, but given the current situation, this was inevitable.

The Decision

The decision was announced by the National Bank of Ukraine.

The Ukrainian government had recently announced restrictions to prevent foreign capital outflows. The decision included any purchase that was remitted outside Ukraine and denominated in Hryvnia. However, there is an exemption of up to 100,000 UAH or $3400 approx. The same rule applies to cryptocurrency purchases.

The decision comes as a result of increasing foreign transactions that led to depleting value of the local currency. Refugees who fled the war need Hryvnia to pay for their stay and needs in foreign countries. A depleting reserve of Hryvnia would make their daily purchases difficult. On the other hand, the government already has a 13% inflation, printing further currency would make situations even worse.

Ukrainian Hryvnia

Since the period of Oct-Nov 2021, when war clouds initially began to appear with Russian military drills, the Ukrainian currency has been in a steep decline. It lost nearly one-fifth of its value. Coupled with foreign exchange outflows, this situation could become even worse. Ukraine had a forex reserve of just $29 Billion.

Combine the above situation with inflation that has resulted from increased government monetization of war efforts. The outside donations were helpful for a while but most of the defense efforts were financed with traditional methods.

Conclusion

Though the government has received millions of dollars in crypto and external government aid, it was not sufficient in a modern war where types of equipment are expensive. hence, responding to difficult circumstances, the National Bank prevented Hryvnia outflows temporarily.