Ukraine Bans Cryptocurrency Purchases in Local Currency

The central bank’s move is to stop “unproductive capital outflows.”

By Mat Di Salvo

A Ukraine soldier. 

In brief

• Ukraine has received millions in crypto donations since the Russia invasion.
• But the government is banning its citizens from buying crypto with local currency to prevent capital flight.

Ukraine's central bank has stopped its citizens from buying digital assets with local currency in a bid to prevent "unproductive capital outflows," according to a statement released yesterday. 

The National Bank of Ukraine (NBU) said citizens can now only buy crypto using foreign currency up to a value of 100,000 Ukrainian hryvnia ($3,400) per month. This will help stop capital flight, according to the central bank.

 Capital flight can harm a nation’s currency. As millions of people have left Ukraine since Russia invaded in February, the exodus of financial assets is a real possibility and Ukraine's government wants to stop this and keep the hryvnia stable. 

"The National Bank of Ukraine clarified restrictions on cross-border operations of citizens in order to prevent unproductive outflow of capital from the country under martial law," the Thursday NBU statement said.

"Individuals will be able to buy assets that are directly convertible (exchanged) for cash and belong to quasi cash transactions, using only their own foreign currency." 

"Quasi cash transactions," include replenishment of electronic wallets and brokerage or forex accounts and payment for traveler's checks, the statement added. 

But despite the move to prevent capital flight, the Ukrainian government is largely crypto-friendly. Last month, Ukrainian President Volodymyr Zelensky signed a law "On Virtual Assets" legalizing cryptocurrency assets in the country. The move was to help play a "vital role in Ukraine's defense process," Deputy Minister of Digital Transformation Alex Bornyakov said at the time. 

Ukraine has received millions in cryptocurrency donations from around the world from NGOs and volunteer groups since Russia invaded the country in February. The donations are aimed at supporting Ukraine's military—which is smaller than Russia’s. 

Over $100 million has now been sent, according to Bornyakov. Digital assets are being used because they are quick and easy to send across borders, blockchain analytics firm Elliptic has said.