Ukraine’s Central Bank Conducts a Test of Digital Currency Using Stellar

The central bank and the Ministry of Digital Transformation have both endorsed the experiment. The Stellar Development Foundation said today that it will test an electronic version of the hryvnia, Ukraine’s national currency, using the Stellar blockchain. The trial, which is being conducted by FinTech startup Bitt and TASCOMBANK, will be monitored by the country’s central bank, with the Ministry of Digital Transformation’s assistance.

The ministry said in January that it has joined with the Stellar Development Foundation, which supports the use of the XLM cryptocurrency and the Stellar blockchain, to develop a central bank digital currency—a concept that the National Bank of Ukraine has been researching since 2017. CBDCs make use of decentralised ledgers, such as blockchains, to facilitate faster, more efficient payments in the domestic currency.

“This pilot project will provide the technical groundwork for the issuing of electronic money and is the next critical step toward advancing payment and financial infrastructure innovation in Ukraine,” Deputy Minister of Digital Transformation Oleksandr Bornyakov stated in a news release.

Ukraine’s rapid progression from partnership to trial puts it considerably ahead of the majority of other European nations and the European Central Bank in terms of building a digital currency. The majority of central banks are still investigating possible CBDC applications.

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France is the most advanced European country. It recently experimented with cross-border payments in collaboration with a Swiss bank. Outside of Europe, China, along with a handful of other nations, is now experimenting a digital currency, according to research website Thus far, The Bahamas is the only country to have pressed the start button; in 2020, its central bank distributed sand dollars to the Caribbean nation’s almost 400,000 residents.

Cryptocurrency is gaining popularity in Ukraine, both among the general public and among lawmakers. According to a September 2020 report by blockchain analytics company Chainalysis, Ukraine has the greatest rate of cryptocurrency usage in the world. Additionally, the government established the Ministry of Digital Transformation in 2019 with the goal of promoting digital literacy and internet accessibility.

The ministry expanded its mission to include cryptocurrencies earlier this year, when it drafted legislation to legitimise Bitcoin and other cryptocurrencies; the law offered legal protection for holders and authorised banks to provide services to crypto companies.

The government thinks that adopting crypto-friendly rules would help the nation attract a new variety of financial services. Volodymyr Dubey, Chairman of TASCOMBANK, concurs.

“With the fast rising effect of virtual assets on our daily lives and economic environment, it is critical for the bank’s long-term market strategy to leverage the benefits of blockchain technology and new connected products,” he added.

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