Why is the e-hryvnia needed and how will it be used?

Central banks in most countries, including the ECB, are exploring the possibility of issuing their own digital currencies (CBDCs). The main reasons for this interest include the rapid development of digitalization in all spheres of modern life, which requires new non-cash payment methods, and the desire to increase the speed and convenience of payments.

Some countries are still at the research stage, while others have already launched pilot projects (e.g. Turkey, Sweden, Singapore, Thailand, India, China, Brazil, Ghana) and are even issuing CBDCs (Nigeria, Bahamas, Ecuador). For example, the ECB is currently preparing to test the digital euro with a view to its subsequent issuance.

The National Bank of Ukraine is also studying the feasibility of introducing its own retail CBDC, the e-hryvnia. We are convinced that in Ukraine, the e-hryvnia should be a complement to cash and funds kept on accounts. It will not be a substitute for them, but only an additional option that can be used at will.

However, no decision has been made to issue the e-hryvnia on a large scale yet. A pilot project, for which preparations have already begun, can help make this decision. We plan to conduct it on the basis of DLT (Distributed Ledger Technology) and in an open environment, i.e. with real users and payment service providers. This will allow us to make sure that the e-hryvnia is capable of performing the functions of money, whether it will meet the needs of users, and whether its programmability is effective.

Of course, anything new always raises a lot of questions. The e-hryvnia is no exception. Businesses and citizens are interested in the results of our research and our plans. To give the public a better understanding of the nature and prospects for the development of the Ukrainian digital currency, we have posted on the NBU website answers to the questions the NBU receives most often in its inquiries on this topic. We have selected the five most frequently asked questions about the e-hryvnia:

1. What is the e-hryvnia?

The e-hryvnia is the NBU's digital money, an electronic form of the Ukrainian currency issued by the NBU. This definition is contained in the Law of Ukraine "On Payment Services".

That is, it is the same hryvnia, only in digital form. Like physical (cash) money, it is a liability of the central bank.

If the decision is made to introduce it, the e-hryvnia will be legal tender in Ukraine and will exist only in non-cash form - as a supplement to cash and non-cash forms of money. It should perform all the functions of money, be convenient and accessible to all categories of users without exception.

2. Why does Ukraine need an e-hryvnia?

The NBU is considering the possibility of issuing an e-hryvnia in order to:

• create a convenient tool for making payments, in particular through their programmability (e.g., to split a payment among several payers, to make payments after certain conditions are met, or for regular automatic payments, or to make targeted state aid), while ensuring the privacy of users;
• provide users with the opportunity to use digital money provided by the NBU and simplify access to it (for example, if the financial institution serving the user is unable to provide access to the digital money wallet, the user will be able to restore access to his or her wallet through another financial institution);
• ensure the economic security of the state and strengthen the NBU's ability to maintain price and financial stability;
• promote further digitalization of the economy and increase the level of financial inclusion in Ukraine;
• to promote the development of Ukraine's payment infrastructure in line with global trends.

3. How and where can the e-hryvnia be used?

It is expected that users will be able to use the e-hryvnia to carry out all possible types of payment transactions in Ukraine, including

• transfers between individuals (transfers between users' wallets)
• payment for goods and services;
• payments in favor of the state;
• charitable payments;
• receive salaries and other income, social benefits.

4. Will the cash hryvnia disappear because of the e-hryvnia?

Cash will not disappear in Ukraine because of the e-hryvnia. The National Bank is not even considering abandoning cash.

The hryvnia, as the currency of Ukraine, is a legal tender in Ukraine and is accepted by all individuals and legal entities without any restrictions throughout Ukraine for payment transactions and settlements. This definition is contained in the Law on Payment Services.

The key purpose of the e-hryvnia will be to effectively perform all the functions of money, complementing cash and funds kept on accounts, rather than being a substitute for them.

Users will be able to choose without restriction which form of hryvnia (cash or non-cash, including e-hryvnia) to use for their payments.

A complete rejection of cash payments in Ukraine is not even possible, especially given the martial law. After all, in today's environment, citizens must have quick and convenient access to funds, including cash, to meet their basic needs (especially given the possibility of blackouts, shelling, and other critical events).

5. Will confidentiality be maintained when using the e-hryvnia?

Confidentiality will be maintained while using the e-hryvnia.

The e-hryvnia platform (the software and hardware complex for issuing e-hryvnia, performing payment transactions, and maintaining wallets , which will be the responsibility of the NBU) will not process or store personal data about users. This information will be processed and stored by the financial institution that will serve the user, as it is now, and will be protected as a bank secret in accordance with Ukrainian law.

The NBU will not have access to or possess any personal information about e-hryvnia users. It will act exclusively as the operator of the e-hryvnia platform, ensuring its continuous and secure operation. Therefore, the NBU will not be able to exercise full control in this matter, as citizens understand it.