Ukraine Suppresses Digital Money Issuance During Martial Law

Ukraine’s central bank has suspended the issue of new electronic money and the replenishment of digital currency wallets.

Ukraine’s central bank said Thursday that it has shut the country’s electronic currency exchanges. This news comes after Ukrainian President Volodymyr Zelensky declared martial rule in the nation earlier today in response to an incursion by Russian military.

This morning, the National Bank of Ukraine adopted new restrictions, including an order suspending e-money issuers, prohibiting e-wallet replenishment with e-money, and prohibiting the distribution of e-money to e-money issuing institutions. E-money is a term that refers to digital fiat currency that is used in conjunction with a variety of payment and conventional banking applications.

While the central bank has not said why it has restricted e-money issuance, it is likely a wise move to protect Ukraine’s financial institutions from cyber-attacks and to prevent cash outflows during the crisis. Notably, the decree made no mention of cryptocurrencies, which are classified under Ukrainian law as “virtual assets.” However, the grounds behind the Ukrainian central bank’s limits on electronic money most certainly apply to crypto assets as well.

Russia’s military invasion of Ukraine has had a detrimental influence on global markets, including the cryptocurrency industry, which saw its value plummet by more than $200 billion on Thursday. Meanwhile, the Russian ruble has fallen to its lowest level versus the US dollar since 2016.

While the Ukrainian government may be seeking to stem money outflows, the Russian government has suggested that it may potentially take dramatic measures in response to growing economic penalties and allegations of western countries freezing the overseas assets of Russian residents.

Nikolai Arefiev, a member of the Russian Communist Party’s State Duma, the lower chamber of Russia’s Federal Assembly, told that the “government will have no option but to take all of the population’s savings.” According to Arefiev, the Russian authorities might take over 60 trillion rubles ($750 billion) in bank deposits from its residents in reaction to international financial penalties.

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