Ukraine’s government has chosen the Stellar blockchain network as a platform to build a central bank digital currency (CBDC).
Announced Monday, the Ministry of Digital Transformation of Ukraine and the Stellar Development Foundation (SDF) signed a Memorandum of Understanding to build out a “virtual assets ecosystem and national digital currency of Ukraine.”
The National Bank of Ukraine has been researching the possibility of CBDC implementation since 2017, and the Stellar partnership will now be the basis of its virtual currency development, according to Digital Transformation and IT Deputy Minister Oleksandr Bornyakov.
“The Ministry of Digital Transformation is working on creating the legal environment for the development of virtual assets in Ukraine,” Bornyakov said in a statement. “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.”
Stellar, the cryptocurrency and non-profit organization launched in 2014 by Ripple co-founder Jed McCaleb, was selected last month by German bank Bankhaus von der Heydt (BVDH) as the means to issue a euro stablecoin. German regulator BaFIN has also approved the issuance of tokenized bonds on Stellar.
Stellar Development Foundation CEO Denelle Dixon said the partnership with Ukraine’s government and other stakeholders to digitize the hryvnia will officially launch this month.
“We’ve been in conversations with governments and institutions all over the world about the key considerations for issuing CBDCs. It’s important to remember many, if not all, of these organizations weren’t designed to be technology companies and that they have many audiences that they are supporting,” Dixon said via an email. “That makes a public-private partnership so essential to getting this right.”
The National Bank of Ukraine mentioned the use of a “private version of the Stellar blockchain” as part of its E-hryvnia Pilot Project back in 2019.
Stellar’s consensus mechanism (SCP) gives issuers unique certainties they wouldn’t have on other public blockchains (like issuer-enforced finality), according to Stellar COO Jason Chlipala.
“SCP would well serve a central bank, reflecting the trusted relationships it would hold and ultimately award it a significant vote in the consensus protocol,” Chlipala told CoinDesk via email.