Ukraine Blocks Digital Currency Issuance Under Martial Law

The Central Bank of Ukraine has temporarily banned the issuance of new electronic money and the reloading of digital cash wallets.

Ukrainian government restricts digital money supply

According to an announcement on Thursday, Ukraine’s central bank has suspended the country’s e-currency markets. This news comes after Ukrainian President Volodymyr Zelensky imposed martial law in the country following the invasion of Russian forces earlier today.

The National Bank of Ukraine implemented new rules this morning, including an order suspending e-money issuers, stopping the replenishment of e-wallets with e-money, and stopping the distribution of e-money to e-money issuing banks. E-money refers to digital fiat currency used with various traditional payment and banking applications.

Although the reason why the central bank has curbed the issuance of electronic money is unclear, it may be prudent to protect Ukraine’s financial systems from any cyberattacks and prevent capital outflows amid the crisis. Notably, the order did not mention cryptocurrencies, which are classified as “virtual assets” under Ukrainian law. However, the reasons Ukraine’s central bank imposed restrictions on e-money likely apply to crypto assets as well.

Russia’s military invasion of Ukraine has negative impact on global marketsincluding the crypto sector, which has seen more than 200 billion dollars worth wiped Thursday. During this time, the Russian ruble fell to its lowest levels since 2016 against the US dollar.

While the Ukrainian government may be trying to prevent capital outflows, the Russian government has indicated that it may also take drastic measures in relation to the emerging economic sanctions and reports Western nations freezing foreign capital of Russian citizens.

Nikolai Arefiev, deputy of the Russian Communist Party in the State Duma, the lower house of the Federal Assembly of Russia, Recount NEWS.ru that the “government will have no choice but to seize all the deposits of the population”. Arefiev estimated that Russian authorities could potentially seize around 60 trillion rubles or $750 billion in bank deposits from its citizens in response to the bank sanctions.

Disclosure: The author does not own any cryptocurrencies mentioned in the article.