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Ukraine Jumps on the Bitcoin Bandwagon
On September 8 and with overwhelming support, Ukraine’s Parliament passed legislation that legalizes and regulates Bitcoin in the Eastern European country. The bill, written in 2020 and which includes certain fraud protections, will next be sent to Ukrainian President Volodymyr Zelensky for his signature.
The action followed an announcement a week earlier by Zelensky who met with movers and shakers in Silicon Valley including representatives from Stellar Development Network where he explored the possibilities of creating a dual-currency economy alongside the country’s fiat hryvnia.
Following El Salvador’s Lead
Zelensky’s progressive move somewhat mirrors that of his counterpart in El Salvador, President Nayib Bukele who led his country to be the first to adopt Bitcoin as legal tender. However, Ukraine’s potential adoption is taking a more cautious route. According to Russian financial expert Professor Vyacheslav Evgenyev, the goal is to open Bitcoin up to business and investors in 2022 then introduce the virtual currency as legal tender in 2023. If all goes well, it will eventually be phased in as the dominant currency.
Getting Over the Bitcoin Mining Hurdle
One big downside of the cryptocurrency market has always been the cost of mining. However, here Ukraine may have a unique advantage. Heavily dependent on nuclear energy, the country purchases most of its resources from neighboring Russia. However, eager to get out from under their thumb, Energoatom, Ukraine’s state-owned nuclear utility, recently signed an agreement with the U.S. Westinghouse Electric Company to install reactors at a number of sites in the eastern European country.
The additional reactors could be used by the country to enable Bitcoin mining, with the state holding or selling said virtual currencies to enhance its GDP. The move could provide greater independence from its overbearing neighbor.
A Country on the Precipice of Change
Until recently, Ukrainians were permitted to buy and exchange digital currencies but under intense and often punishing scrutiny from authorities. However, the new law will begin to establish a legal framework for Bitcoin as well as other cryptocurrencies which is expected to relax such constraints.
Mykhailo Fedorov, Ukraine’s Minister of Digital Transformation, said the country has begun the necessary work that will allow its National Bank to issue digital currencies. By legalizing digital assets, Federov said Ukraine joins other forward-acting countries including Germany, Luxembourg, and Singapore.