Ukraine’s currency, the Hryvna, has been sent into a tailspin as unrest in the country has further devastated its economic outlook. After being held tightly in check against the dollar for years, the currency has fallen by 20% in only two weeks to trade at below $0.10.
The declines come amid Russia appearing to make good on threats to use force in Ukraine. Its parliament unanimously and resoundingly approved such measures on Saturday and troops have already moved into the Crimea peninsula.
The country’s currency is now stuck a vicious cycle: its ousted prime minister, Viktor Yanukovich, had previously cut its free trade pact with the EU in favor of closer ties with Russia, catalyzing the start of the current economic crisis. As his popularity plunged, protests and violence escalated, culminating in his ouster but further deepening the crisis as the country’s economic prospects grew gloomier. Russia’s invasive involvement threatens to further isolate the country from the EU and by the extension, the West.
Ukrainians have rushed to withdraw deposits at local banks, with the banks imposing limitations, claiming security considerations in order to withstand a wave of cyber-crime, This has further lessened the appeal of the hryvna. Initially, Ukrainians flocked to safe havens like USD and EUR, and for the most part continue to do so. There had been some pull for the adoption of Bitcoin. It would come in highly advantageous in a place where international transfer and payments in traditional currency are highly inefficient and expensive, and where limitations are placed on the amount of local currency withdrawn and foreign currency purchased.
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There have been a few obstacles. There isn’t really a direct online way to transfer bitcoins back into hryvna. Except for trading in person, this means that Bitcoin’s main value would have to be derived from businesses accepting it as currency, which is virtually unheard of today. There has been a bit of recent push to increase acceptance amongst business owners.
The cryptocurrency has not nearly experienced the same rate of adoption as elsewhere and many remain uneducated about it. Some have commented on reddit that while the hryvna is struggling, Bitcoin still remains far more volatile. Finally, the central bank recently required all Bitcoin related businesses to register, adding another hurdle toward its wider dissemination.
According to Bloomberg, Bitcoin donation campaigns have been picking up, now totaling over $15,000 worth in proceeds- equivalent to 4 years of earnings for the average Ukrainian.
For its part, the Russian ruble has ploughed fresh lows 5 year lows versus the dollar, now trading below $0.028, which also amounts to a 20% drop since its peak in early 2011. For them, it is less likely for Bitcoin to offer any relief after officials effectively banned use of the cryptocurrency. Should Russia prove successful in exerting their influence over Ukraine, Ukrainians may be faced with a similar dilemma.