What is crypto hryvnia? Is there a need in it?
Let’s start from the beginning. There is no certain definition of crypto hryvnia, and it is normal. Overall, it is a digital asset. The most familiar to it asset is cash. Cash is a physical asset, it exists in a paper form, which is accepted by everyone, so you can bring it to a bank and deposit into your bank account. If we wanted to make hryvnia digital, we would set up accounts, easily accessed through applications and places where you bring physical money, and deposit it into your account as crypto hryvnia. Namely, this is such an electronic equivalent of hryvnia.
How can one do it?
It can be done either in a centralized way (through the regulator) or in decentralized. In the first case, National Bank of Ukraine (NBU) would have to set up accounts on its servers, then people would bring cash and NBU would deposit it into their accounts. Currently, there are no such examples in real life, as all the central banks work only with financial institutions, not individuals. Central banks run the clearing operations between banks, while banks, in turn, set up accounts for individuals. Alternatively, you would set up your account at NBU directly.
If crypto hryvnia is introduced in a decentralized way, then it could be done as on the Blockchain. For example, one may introduce KSE-coin and fix that one coin is equal to one hryvnia. One keeps a digital record, and every time when money is brought to him/her, one makes a digital record that person owns some amount of money. Therefore, the difference is determined by who administers and guarantees exchange.
Key aspect: we should trust the issuer whether it is a private body or central bank. We should believe its course of actions and know this body will not disappear. In this case it is easier with NBU, as it will accept hryvnia and provide you with its electronic equivalent. This institution is protected by law and will not disappear simply. Nevertheless, mechanisms and services of central banks may not be as high quality as those of private issuers.
Unlike cryptocurrencies, cash has its strong benefit of privacy. You give away 100 UAH to someone and no one except for you two knows about this. If you are to testify at prosecutor’s office, the fact of handling money will be very hard to prove. If information is stored on the servers, it is easy to monitor them. It may be both good and bad.
In Ukraine both state and private initiatives on crypto hryvnia exist. The latest research proves that people value their work with an asset and customer experience more than quality and fundamental aspects.
A private initiative is more flexible, open, and beneficial for clients. Nevertheless, it may go bankrupt under some circumstance or face problems, while NBU will not default and it has more mechanism to secure the crypto hryvnia for its owners. The claims regarding customer support, security, and safety are not satisfied yet, as well as problems of introduction of the system.
Are there countries, which are close to introduction of such initiatives?
There exists a Swiss initiative, as well as some others, but there arises a problem of commercial banking, and if people would trust the new system. Cash is an extra bank asset, which one might use independently of banks, which are not yet perfect. Cash is widely used and trusted. Therefore, it is a question if it is the time to introduce a new asset which we do not understand fully. It is expected then that state bodies are more conservative in this question, while fintech organizations are very progressive.
But the fact that crypto hryvnia was tested both by private companies and state regulatory body proves that our National Bank is very modern and innovative as for a developing country.
If crypto hryvnia is introduced, in how many years will we see its feasible effect?
It is hard to say: it might be in a year as well as never. Generally, crypto hryvnia has numerous problems to tackle. This is a question of security, monitoring, and turnover volumes. In view of this, I cannot make some more or less precise prediction under these circumstances.
Translated by Maryna Shykun and Mykola Kravets