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 Steller.
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,” said Dixon in an email.
“That makes a public-private partnership so essential to getting this right and delivering on innovation that will be transformative for citizens. Many of the entities already building on Stellar can provide that type of partnership. We look forward to supporting the Ministry of Digital Transformation in its work to define its future,” Dixon said.
“There are a number of reasons why I think Stellar, an open, permissionless network, is well-suited for CBDCs,” Stellar COO Jason Chlipala told CoinDesk via email. “First, asset issuance is a native feature on Stellar, which comes along with issuer-focused features such as controlling which accounts gain access to the digital asset, the process by which access is granted, and as a whole, the anchor model on Stellar means the financial rails are tied into the existing regulatory system.”
Stellar’s consensus mechanism (SCP) gives issuers unique certainties that they wouldn’t have in other public chains (like issuer-enforced finality), according to 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,” he said.