Ukraine is building a digital future with Bitcoin
Adopting Bitcoin could be Ukraine’s biggest geopolitical move to usher in a prosperous future.
Bitcoin, among other cryptocurrencies, could soon be used legally in Ukraine, once President Volodymyr Zelensky signs the legislation passed by the Ukrainian Parliament on September 8. This law will protect owners of virtual assets and exchange platforms from fraud, and rumors abound that Ukraine is preparing to transition to a fully digital economy and consider bitcoin to be legal tender. The legislation will help determine how Ukraine will regulate the cryptocurrency market in the future and officially allow Bitcoin businesses to operate in the country.
Since the inception of Bitcoin in 2009, cryptocurrencies have grown from a fringe subject and little-known technology to a prolific financial instrument that has galvanized the public and has grown to play a bigger role in and reshape our economy. global. The cryptocurrency economy is the next trillion dollar opportunity and is still in the early stages of innovation.
The Ukrainian government, or even more so the Ukrainian public, understands this opportunity and stimulates societal progress by taking the necessary measures to participate in this economic growth with recent legislation. Ukrainian officials have reportedly traveled to El Salvador to meet officials there, as the country has already made bitcoin legal tender, to learn more about the implementation.
Bitcoin is a form of currency that is traded only in the digital world and is believed to be completely decentralized from government. This allows users to oversee and approve transactions on the blockchain – a decentralized public ledger – which is a growing list of records that cannot be changed. These open online ledgers eliminate the need for a trusted intermediary such as a bank.
Drafting pro-bitcoin legislation is a milestone for the burgeoning cryptocurrency industry that reflects the sentiment of the Ukrainian public. Cryptocurrencies are popular in the country and it is estimated that more than 5.5 million people, or 12.7% of Ukraine’s total population, currently own some form of cryptocurrency, according to the platform. payment platform Triple A. Blockchain data company Chainalysis has ranked Ukrainians among the top users of cryptocurrency. worldwide in September 2020.
The bitcoin mining space has interesting implications for Ukraine’s energy sector, as Ukraine produces almost half of its electricity through 15 nuclear reactors. Ukraine’s Energy Ministry argued that bitcoin mining âis a contemporary and efficient way to use excess energyâ. The Department of Energy has sought innovative solutions to tackle energy waste and improve efficiency as the sector is plagued by inefficiencies and financial losses.
The bitcoin mining industry is an ideal partner to consume the surplus energy from nuclear reactors by taking the excess electricity and using it for bitcoin mining. This would help maintain energy production requirements, while helping to attract new investment funds for Ukrainian nuclear power plants. This opportunity positions the Ukrainian government as a strong support node for the entire mining network. It will help provide clean and sustainable bitcoin mining as well as a free market solution to inefficiencies in the energy sector.
The financial implications are vast. The state-owned company that operates the country’s nuclear power plants, NAEC Energoatom, recorded losses of more than $ 170 million in 2020. Bitcoin mining gives Ukraine’s energy sector some life to get out of this hole black financial. The mining project is already underway, as Energoatom “has reached an agreement that will allow it to supply energy to mining operators in the crypto mining division of Bitfury.” As a result, the Ukrainian government could mine bitcoin and keep it in its reserves, or it could deposit it into an account for each citizen or sell bitcoin to increase national GDP.
Ukrainians made around $ 400 million from bitcoin investments in 2020, making Ukrainian bitcoin investors one of the richest in the world. The bitcoin craze in Ukraine is not only limited to the public, but has been embraced by Ukrainian officials and large swathes of government. In early 2021, Ukrainian civilian officials reported owning more than $ 2.6 billion worth of bitcoins, noting that “the largest number of cryptocurrency owners work in city councils, the defense ministry, and the national police” .
According to the World Bank, nearly 10% of Ukraine’s GDP in 2020 came from personal remittances sent to Ukraine. Many Ukrainians have emigrated and continue to send money home to their families, paying exorbitant money transfer fees through traditional banking methods. However, bitcoin changed everything. It offers Ukrainians a faster and cheaper way to send money across borders without a bank or service acting as an intermediary.
Before the days of bitcoin, the bank or service converted the money, transferred the funds to the recipient’s country, and then converted them back to the local currency. However, a World Bank study found that fees average 6.38% of the amount sent.
Worse than the fees, the Ukrainian public has very little confidence in the Ukrainian banking system due to severe corruption. Several large banks collapsed, the Ukrainian government declared more than 90 banks insolvent, and many people lost money due to a constant stream of banking scandals. In 2016, the government stepped in to nationalize PrivatBank, which accounted for 20% of Ukraine’s banking sector, after the government discovered that more than $ 5 billion was missing from its books. Ukraine’s banking sector is widely seen as dysfunctional and dominated by corrupt oligarchs.
After Russia invaded Ukraine in 2014, the Ukrainian economy plunged and the national currency, the hryvnia, lost 70% of its value against the dollar. This further undermined the savings and purchasing power of the public. Now, the average person with a small savings will often hide their money at home and not bother to store it in a bank.
Even before this infamous pattern of behavior, the Ukrainian banking industry did not develop the same way it did in the West after the collapse of the Soviet Union. The process of transferring funds was problematic due to the lack of infrastructure. Unscrupulous methods were then developed with financial instruments such as vouchers and exchanges that allowed for extensive money laundering programs and questionable business practices.
Given the high degree of corruption in government, business and banking sectors, illegal asset seizures by corrupt politicians, and the collapse of several major Ukrainian banks, it is only reasonable that the decentralized nature people like bitcoin. Ukrainians have turned to bitcoin to protect their assets. The young and innovative population looks forward to the future and is ready to leave the scandalous and broken system behind. The desire for change is great and the prospects for bitcoin for Ukraine are huge.
A Ukrainian government support framework for the digital asset space will allow more businesses to expand in the space, fund state taxes and spur innovation as the adoption of bitcoin will not will only increase. With high adoption rates and the state promoting bitcoin-friendly legislation, Ukraine has a chance to become one of the world’s leading bitcoin hubs. This opportunity should not be wasted.
This is a guest article by David Kirichenko. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.