People in Ukraine are turning to bitcoin in their search for a means to preserve their savings while the national currency is heavily affected by the inflation and the capital controls introduced by the authorities.
The Ukrainian national currency, hryvnia, has experienced a major decline in price in February, according to Bloomberg. The currency’s plunge caused massive withdrawal of deposits from Ukrainian banks, reaching as much as 17.2 billion hryvnia ($631 million).
The National Bank of Ukraine Governor Valeriya Gontareva changed capital control measures three times last week in an attempt to preserve the country’s financial stability. A ban on commercial bank purchases of foreign currencies on behalf of their clients was introduced on Wednesday, February 25, and subsequently repealed after government criticism. It is still almost impossible to exchange UAH for USD or other foreign currencies in Ukrainian banks.
This situation pushes even non-tech savvy people to turn their savings into bitcoin. The price of bitcoin on LocalBitcoins in UAH, the national currency, at the moment ranges from approximately $353 to more than $400, which exceeds the current market price by approximately 40%. The main problem for Ukrainian citizens is how to bypass the government controls and to convert their funds into bitcoin while the local currency is not wanted by anyone. The payment options offered by LocalBitcoins include big electronic payment systems such as WebMoney, Perfect Money, OKPay, and Moneygram, as well as bank transfers. Current offers to buy bitcoin in the national currency are through bank transfers and other online payment methods with smaller payment operators.
“Yesterday a 62 year old man managed to get back his money from the bank (after 3 month of persistent attempts) and came to buy bitcoins. He does not trust the state nor the bank and is willing to take the risk of bitcoin volatility.”
- Michael Chobanian, the Bitcoin Embassy of Ukraine founder.
CoinFox reported earlier this year that weapons and ammunition for the war in the Eastern Ukraine were allegedly purchased with bitcoin on the dark web. By mid-February, a Ukrainian website run by Yuri Biryukov, President Petro Poroshenko’s aide, had collected donations to purchase supplies and equipment for the Ukrainian army to the tune of 5.88 BTC sent by 68 donors.