Ukraine’s economy and banking system are showing signs of steady recovery over the past year. The stabilisation may create a favourable climate for implementing the blockchain technology.

Ukraine boasts an extraordinarily high percentage of certified IT professionals (in 2002 it ranked fourth according to Brainbench Global IT IQ Report). Besides, it was voted Outsourcing Destination of the Year in the 2011 European Outsourcing Excellence Awards. No wonder, the country has been seen by its own crypto community as a possible heaven for the development of bitcoin, blockchain and related crypto technologies. 

Bitcoin and blockchain for geeks

The primary use of bitcoin and its blockchain by Ukrainians has followed two main directions. The first use case presented a venue for bypassing governmental restrictions on the purchase of foreign currency. In March 2015, Ukrainian authorities imposed capital controls, thus creating an environment where cryptocurrencies and bitcoin in particular could thrive in a similar way as in Greece last summer or in Argentina before the government of Mauricio Macri lifted currency controls.

At that time, Michael Chobanian, founder of KUNA, the first bitcoin agency in Ukraine and Eastern Europe, and co-founder of Bitcoin Foundation Ukraine (BFU), told CoinFox that, while there is a general lack of knowledge of the technology behind bitcoin, still, “current problems with the currency and the banking system push people to search for a solution. There is only one alternative – bitcoin.”

Chobanian was also quoted by the website of Bitcoin Conference Kiev as saying that for bitcoin to be massively adopted in Ukraine, investing in BTM infrastructure is needed, as well as the adoption of the cryptocurrency as a payment option by the e-commerce sector. 

While Ukraine, the website claims, “is one of the top five countries in terms of the number of bitcoin wallets,” the most active users are IT specialists and geeks. Therefore, the second main implementation of cryptocurrency and the related technology in Ukraine is within the circle of tech-savvy crypto and blockchain enthusiasts. 

Bitcoin and blockchain for banks and government

The situation seems to have changed towards the end of 2015, as the governmental and banking sectors showed signs of interest in bitcoin and blockchain. As CoinFox reported then, at the Bitcoin Conference Kiev in September 2015, the representative of the National Bank of Ukraine Natalia Lapko declared that “the National Bank will integrate electronic money into the financial system of Ukraine.” Commenting on the announcement, Michael Chobanian noted that “the key problem of bitcoin integration lays not in the National bank, but in the Tax Service.” Meanwhile, Yuri Vlasenko, a trustee of the National Depository of Ukraine, suggested that blockchain could be implemented to ensure the data record integrity at the state level.

In December, leading Ukrainian bank PrivatBank announced that it had finished testing a new cryptocurrency payment service. According to Kristina Karmazina, manager of its e-commerce department, PrivatBank was “looking for partners that would be ready to integrate bitcoin into their checkout pages.”

The PrivatBank’s announcement was closely followed by Natalia Lapko’s statement that the National bank of Ukraine is assessing bitcoin’s potential and does not rule out the possibility of integrating it into the financial system. 

Just a month later, in January 2016, the Ukrainian national regulator announced on its Facebook page that it “is considering granting to non-banking financial institutions the right to act as an emitter of electronic money.”

Blockchain established itself even more firmly on the national agenda in February 2016 when Boris Lozhkin, the head of the Presidential Administration of Ukraine, stated in a blog entry that government-employed Georgian experts have suggested the technology to be used for the creation of the national database: 

“This will rule out manipulations in the databases, eliminate the database ownership monopoly and stimulate competition. At the same time, the participation of the private sector in maintaining the databases will make it possible not to spend millions of UAH on buying servers and will fasten the process of issuing documents.”

Later in the same month, Ukrainian and US-based blockchain firms signed a memorandum to develop e-Vox, an electronic voting system, with the objective of preventing electoral fraud. 

On 31 May 2016, rating agency Moody’s changed Ukraine’s banking system outlook from negative to stable. The country’s government and banks stood firmly in support of a blockchain-based decentralised property auction initiative which was promoted as a means to fight corruption. As Dr Pavel Kravchenko, one of the eAuction platform developers, told IBTimes: 

“This project is helping to drive change in Ukraine. International investors have forced the Ukrainian government to fight corruption, so now the state can use this project as a sign to say: Ok, we are fighting it.”

Finally, most recently in July 2016, Ukraine’s Minister of Finance, Oleksandr Danilyuk, announced that his Ministry is planning to implement the eAuction platform. As quoted by Brave New Coin, Danilyuk stated: 

“We would like Ukraine to be the first country in the world that use the blockchain in selling state assets: to sell them transparently at the highest price and to make sure that there’s no place for corruption. And I believe that the blockchain offers such opportunities.”

Blockchain for knowledge

Ukraine has also been the meeting point for bitcoin and blockchain enthusiasts, businesses interested in the technology and state regulators by featuring an impressive calendar of related conferences. Already in September 2015, Innovecs and Bitcoin Foundation Ukraine announced the launch of the first blockchain research centre in Ukraine. 

In December the same year, the Blockchain Conference took place in Kiev, then one more time on 20 May 2016.

Lviv hosted the Blockchain Incredible Party conference in January 2016, while this coming September, Kiev will see the Third Annual Blockchain & Bitcoin Conference, which will run three parallel tracks, namely, for rookies, developers and experts. Importantly, it will also include a section dedicated to discussing regulation and the future of cryptocurrency and blockchain in Ukraine. This last session features panels on blockchain land registry, e-auctions and smart contracts. 

The conference organisers also state that “Ukrainian fintech market can boast the development of blockchain technologies. A group of specialists has been formed in Kiev, and thanks to their efforts the country is among top-3 regulators of blockchain trends. Here you can find everything that is needed for gathering major players of blockchain community of CIS countries and Europe.”

Finally, the country has set its foot in the IoT scene, as Ukrainian-based international custom software developer Ciklum won first place at the IOT For Cities Hackathon during the Internet of Things World in Santa Clara, California for its smart AED (autonomous external defibrillator).

Thus, Ukraine excels in terms of its IT expertise, counts on favourable interest in blockchain technology on behalf of the government and the banking sector and, in addition, has managed to turn itself into a vibrant hub for the exchange of knowledge and ideas between members of the bitcoin and blockchain community. The world awaits to see what comes next. 

Diana Bogdan