UPDATE 03/01/22:
A lot has changed since I originally wrote this article. In the fall, when this information became available, everyone was at peace in Eastern Europe, and Ukraine was a bustling first-world country entertaining options of joining the EU. But a lot has changed with the invasion and the ongoing war started by Russia. It is a dire situation for the independent country and the citizens of Ukraine. This conflict, unfortunately, is a real-world test of Bitcoin as freedom money. Does it truly have the power to withstand the aggression of authoritarianism and oppression of the State? Time will tell.
It is also a test of modern ISP technology that may become the foundation for a digital Bitcoin monetary network to thrive. Elon Musk has “switched on” his global satellite system to provide satellite internet service to the country. It is still in the early stages of development. But, after Russia invaded, some of the internet, banking services, and utilities in Ukraine were shut down. The combination of Starlink and Bitcoin may be a lifeline to help people continue to communicate and transfer value. The effects and the outcomes of this moment for Ukraine may have a long-lasting impact on the course of society, technology, and the future of money.
Original Post:
Rumors are beginning to surface that Ukraine is considering adopting Bitcoin as legal tender. President Volodymyr Zelensky or representatives from his nation have met with officials in El Salvador to discuss such implementations. El Salvador was the first country to adopt Bitcoin as legal tender, and President Nayib Bukele has been at the forefront of nation-state discussions on Bitcoin as legal tender.
Earlier this week, Ukraine legalized Bitcoin and clarified its status in the country. Previously there was no guidance on whether it was legal to own, use, or invest in cryptocurrencies. You can read more on that event here.
President Zelensky has been a proponent of Bitcoin and has attempted to persuade the government to create a crypto-friendly environment in which it can flourish.
According to the article by Darren Parkin at CityAM,
“The plan, says Professor Vyacheslav Evgenyev, is for Ukraine to make Bitcoin legal tender by the start of 2023 and create a “duel-currency country” where Bitcoin sits alongside the fiat hryvnia before potentially being phased in as the dominant financial structure.”
Professor Evgenyev continues,
“You need to look at the dynamic of Ukraine to understand how and why its government’s plan to restructure towards a digital economy could actually be a real stroke of genius,” Prof Evgenyev explained.”
“It has a young population eager to move out of the shadow of its noisy neighbor and shake off the financial chains which have restrained it for so many years.
“Russia’s overbearing influence in the concerns of Ukraine could prove to be the fuel to it needed for the engines of success.”
Bitcoin, he believes, may be the magic potion required to wake a sleeping giant.
“The prospects here are enormous,” the professor adds.
Although the information is pretty fresh, it still looks like this might be a few years out. According to the article, the plan is to have a “dual currency” nation that includes the fiat hryvnia and Bitcoin as legal tender by 2023. It will be interesting to see how this plays out. How will this experiment of a fiat currency alongside sound money even work? Based on the history of money, I would suspect that in the end, the soundest money will win out and make the hryvnia irrelevant.
Also, another test will be the adoption of Bitcoin as legal tender in a much larger and more developed nation:
- Ukraine has a population of 43 million, while El Salvador’s is only 6 million.
- The GDP of Ukraine was $155 billion compared to El Salvador’s $24 billion.
Therefore, finding a useful and efficient way to transition to a “dual currency” is a much larger task at this point. And how this plays out in El Salvador and Ukraine will have lasting effects on adoption worldwide. Maybe this is a glimpse of how Bitcoin revolutionizes money in a more peaceful and promising way rather than using force, as happens with fiat. Only Bitcoin time will tell.
