Ukraine Taps Stellar Foundation to Develop National Digital Currency

Ukraine’s Ministry of Digital Transformation and the Stellar Development Foundation have agreed to co-develop the country’s virtual assets strategy, the partners announced today.

The agreement will see the Stellar Development Foundation (SDF), the organization behind the Stellar cryptocurrency (XLM), work to develop Ukraine’s central bank digital currency (CBDC). The National Bank of Ukraine started exploring a CBDC in 2017, according to today’s release.

“The Ministry of Digital Transformation is working on creating the legal environment for the development of virtual assets in Ukraine. We believe our cooperation with the Stellar Development Foundation will contribute to development of the virtual asset industry and its integration into the global financial ecosystem,” said Oleksandr Bornyakov, Deputy Minister of Digital Transformation for IT Development.

“Another important aspect of this cooperation is contributing to the development of the infrastructure for a Ukrainian national digital currency. Most of the world's leading countries are developing their own national digital currencies,” he added. “At the Ministry, we aspire to ensure our country's adaptation to technological innovations and competitiveness in the financial market in Eastern Europe.”

In addition to developing a CBDC based on Ukraine’s hryvina fiat currency, Stellar will help build the country’s virtual asset infrastructure and provide support for related projects, as well as help implement regulation for stablecoin assets in Ukraine. The organizations will begin work this month.

Today’s announcement does not state whether Ukraine’s digital currency will be on Stellar’s XLM blockchain. CoinDesk notes that the Ukraine National Bank previously mentioned use of a “private version of the Stellar blockchain” in a report on its digital currency pilot program back in 2019.

"This is the beginning of the work together to help set the strategy for virtual assets and a path towards a CBDC, the issuance of which ultimately is the decision of the National Bank of Ukraine. SDF is acting as an advisor to the Ministry of Digital Transformation’s working group on the topic," Lauren Thorbjornsen, head of communications at the SDF, told Decrypt.

"Nothing is being built on Stellar at the moment but that’s what we hope to see as the outcome due to the Stellar blockchain’s capabilities," she added.

The Ukrainian alliance comes following a series of Stellar-backed stablecoin debuts in other countries. In November, Stellar partnered with Shift Network to launch stablecoins in Argentina and Brazil to aid with remittances between the economies, while December saw Stellar agree to develop a Euro stablecoin for Germany’s Bankhaus von der Heydt (BVDH).

“We believe digital assets and national digital currencies are one of the most important innovations of our lifetimes and we are excited to play a role in the creation of Ukraine’s digital asset infrastructure,” said Denelle Dixon, CEO and executive director at the SDF.

“Through the leadership of the Ministry, Ukraine has demonstrated its commitment to fostering an environment of innovation for the digital economy,” she continued. “We look forward to working with the Ministry and other stakeholders to digitize the hryvnia, to bring Stellar-based tools and services to the people and businesses of Ukraine, and to introduce new partnership opportunities in Ukraine to businesses in the Stellar ecosystem.”

Ukraine was recently ranked number one in Chainalysis’ Global Crypto Adoption Index, which measures the use of Bitcoin and other cryptocurrencies amongst ordinary citizens.

Update: This article has been updated with comments from the SDF.