The Central Bank of Ukraine sets a "red line" for encryption: strictly prohibits it as a means of payment and launches a pilot for the electronic hryvnia.

The Governor of the National Bank of Ukraine (NBU), Andriy Peshny, has made it clear that the process of legalizing virtual assets in Ukraine must strictly adhere to the "red lines" — they must not become a means of payment, and they cannot undermine the effectiveness of the Central Bank's monetary policy or evade wartime capital controls. Peshny emphasized that the core of legalization lies in "de-shadowing", which must comply with FATF AML standards and EU regulations to enhance international financial reputation. Meanwhile, the NBU is accelerating the testing of the Central Bank Digital Currency (CBDC) electronic hryvnia framework in collaboration with the European Central Bank, the Deutsche Bundesbank, and other institutions from five countries to prepare for pilot projects, paving the way for future large-scale issuance. In June, a proposal by Ukrainian lawmakers to allow the Central Bank to hold Bitcoin stands in subtle contrast to the current regulatory stance.

The "Red Line" of Cryptocurrency Legalization: Payment Ban and Inviolability of Monetary Sovereignty The head of the Central Bank of Ukraine, Kyrylo Shevchenko, set the core premise for the legalization of crypto assets in an exclusive interview with RBC-Ukraine: "Virtual assets must never become a means of payment, and must not in any form undermine the effectiveness of our monetary policy tools." He firmly stated that this is a regulatory "red line" that the NBU cannot cross. Shevchenko emphasized that the legalization of crypto must not lead to a transfer of monetary power or weaken the functions of regulatory agencies. In the context of wartime financial controls, crypto assets must not become tools for circumventing foreign exchange restrictions.

Core Compliance: AML Benchmarking FATF, Promoting the "De-shadowing" of Cryptocurrency The governor pointed out that the legalization of virtual assets must ensure the effectiveness of financial monitoring, and relevant legislation must strictly follow the international FATF standards and EU regulatory framework. Peshne will promote the de-shadowing of crypto as a key goal, believing that this move will significantly enhance the reputation of Ukraine's financial system among international partners and create favorable conditions for joining the EU. This statement shows that the Ukrainian authorities are trying to seek a balance between attracting crypto capital and preventing financial risks.

Electronic Hryvnia Accelerates: Central Banks of Five Countries Collaborate, Pilot Plan Takes Shape Peshne revealed that the NBU is actively testing the e-Hryvnia architecture model and is preparing pilot projects with technical partners. Given Ukraine's European integration process, the NBU is highly concerned about the progress of the Digital Euro project. The governor stated, "We hope the pilot will gather enough data to support large-scale issuance decisions while closely monitoring the developments of various countries' CBDCs." Currently, cooperation has been established with the European Central Bank, the Deutsche Bundesbank, the National Bank of Belgium, the Banque de France, and the Monetary Authority of Singapore, but no specific timeline for the launch has been announced.

Policy Contradiction: Legislators Push for Central Bank to Hold Coins, Regulatory Attitude Cautious It is worth noting that in June 2025, a Ukrainian legislator submitted a draft proposal to authorize the Central Bank to include cryptocurrencies such as Bitcoin in the national reserves. This motion creates a policy tension with Peshne's strong stance on crypto non-monetization, reflecting the country's complex attitude towards emerging assets under wartime economic pressure. Subsequent developments will need to observe the outcomes of the game between the legislative body and the Central Bank.

[Conclusion] The "cryptocurrency red line theory" of the Central Bank of Ukraine establishes a clear coordinate for digital asset regulation in Eastern Europe: while actively advancing the pilot of the electronic hryvnia, it cuts the functions of cryptocurrencies and fiat currencies with payment bans, strictly preventing capital flight and the failure of monetary policy. This strategy of developing CBDC while restricting private chains aligns with the spirit of the EU MiCA framework, adding leverage to the negotiations for EU membership. However, the wartime economy's demand for liquidity and the proposal by lawmakers to hold central bank digital currency suggest that there are still variables in the policy. Ukraine's path to cryptocurrency legalization is essentially a difficult balance under the triple pressure of geopolitical crisis, EU compliance, and financial innovation, and its final solution may serve as a regulatory model for Eastern European countries.