Ukraine parliament adopts law on currency operations

Ukraine’s parliament voted on June 21 to approve the final
reading of a bill regulating foreign currency operations in Ukraine. The law,
initiated by the National Bank of Ukraine (NBU), replaces a number of obsolete
legislative items in order to comply with the regulator’s latest policy on
ForEx liberalization.

The law also removes excessive government control on
some ForEx operations, potentially enlarges the circle of currency market
participants via cancellation of related licensing, and cancels penalties for
currency regulations violations. At the same time, the NBU is still authorized
to protect the market by imposing the compulsory sale of foreign currency
receipts, introducing special permissions for certain operations, requiring
reserves for currency operation, and setting time periods for clearing payments
on export and import operations.

“The law ‘On currency and currency operations’ will
create comfortable, transparent and safe conditions for doing business in
Ukraine,” said NBU Governor Yakiv Smoliy. “It will open doors to
foreign investors. And Ukrainians will get the right to invest in securities on
global markets and keep their money on accounts in any bank around the
world.”

Evgeniya Akhtyrko: This
adopted law is another important step towards ForEx market liberalization in
Ukraine. To complete the process, Ukraine needs to join the international
cooperation on counteracting BEPS (Base Erosion and Profit Shifting).

The major risk of the adopted law – and the overall
ForEx liberalization – is increased foreign currency outflow, which could shake
the stability of the national currency. However, past experience shows that
strict restrictions on currency operations can hardly be viewed as an effective
tool for maintaining the positions of the national currency. On the contrary,
they only impede business activity.