Financial Stability Council discussed cooperation between the Parliament and the NBU and noted the urgency of defining the Bitcoin land other cryptocurrency legal status in Ukraine
On 31 August 2017, took place the regular meeting of the Financial Stability Council, headed by the Minister of Finance of Ukraine Mr Oleksandr Danyliuk with participation of Acting Governor of the National Bank of Ukraine Mr Yakiv Smolii, Head of the National Securities and Stock Market Commission Mr Timur Khromayev, Head of the Nthe National Commission for the State Regulation of Financial Services Markets, Mr Ihor Pashko, Managing Director of the Deposit Guarantee Fund Mr Kostyantyn Vorushylin, Deputy Minister of Finance Ms Oksana Markarova and Yuriy Butsa, Deputy Governors of the NBU Ms Katerina Rozhkova and Mr Dmytro Solohub, and other representatives of these institutions.
The Council noted that systemic risks to the financial system remain under control, and expectations remain positive. Economic growth is volatile and moderate due to the long negative effects of the blockade of uncontrolled territories, but it must accelerate in 2018.
At the same time, the risks have increased due to the fact that inflation may deviate more significantly from the mid-point of the target range (8% ± 2 pp) than it was expected by the NBU. This is mainly due to the rapid increase in the prices on vegetables and fruit due to adverse weather conditions and reduction in the supply of meat and dairy products on the domestic market. At the same time, the fundamental pressure on inflation remains moderate, in particular due to low volatility in the currency market and the stabilization of inflationary expectations.
Deposits inflow continues to grow that allows the NBU to lift the resrictions on funds withdrawak from foreign currency deposits comletely.
Part of the meeting of the Financial Stability Council was dedicated to discussing cooperation between the Government and the NBU to ensure price stability, which is an important prerequisite for financial stability in the long run.
"We support the initiative of the Government and the Ministry of Finance to introduce medium-term budget planning as a prerequisite for strengthening the sustainability of public finances. Conducting prudent fiscal policy and reducing debt load will help achieve low and stable inflation. We hope that the 2018 budget will be adopted on the basis of the approved budget resolution for 2018-2020, which envisages the transition to a three-year budget planning horizon ", - said Deputy Governor of the National Bank of Ukraine Mr Dmytro Solohub.
Also, according to the NBU, price stability will be facilitated by medium-term forecasting of the dynamics of funds on the accounts of the Government and management of their balances.
According to First Deputy Minister of Finance Ms Oksana Markarova, further increase in the efficiency of liquidity management will become possible after the transition to medium-term budget planning not only at the central, but also at the local level. This will ensure more even and predictable government spending.
During the meeting of the Financial Stability Council, the issue of tax aspects of banks dealing with problematic debts was considered. To date, part of the problem issues that banks face in their daily work is removed. According to the results of the discussion, it was agreed that the Ministry of Finance after consulting with the NBU will come up with a tax explanation in order to ensure a uniform interpretation of the tax legislation.
One of the topics discussed at the meeting of the Financial Stability Council was the development of capital market infrastructure. The Head of the National Securities and Stock Market Commission Mr Timur Khromayev said that in accordance with the Memorandum of Understanding on cooperation between the National Securities and Stock Market Commission and the NBU in this area, the reform of the depository clearing and settlement infrastructure is ongoing.
At present, work is underway to introduce a new software complex, which will meet international standards, for the depository clearing transaction at the National Depository of Ukraine and the Settlement Center. "Acquisition of such complexes and systems will take place on a tender basis, and their implementation will be scheduled for 2018," specified Mr Tymur Khromayev. After the creation of the basic functional, technological and regulatory prerequisites, the consolidation of the NBU and the National Depository of Ukraine will be consolidated into a single depository, which will be responsible for accounting for state, municipal and corporate securities.
At the same time, the clearing system should be simplified and separated from other activities, in particular those relating to tpayments on transactions or banking activities. The legally established monopoly of the Settlement Center in clearing and processing cash settlements for securities transactions will be abolished, and access to the Ukrainian market will be opened to foreign clearing institutions. However, the Settlement Center must be transformed from a banking institution, the main shareholder of which is the NBU, to a specialized financial institution that will 100% belong to the National Depository of Ukraine and which will act as a "light centralized counterparty" (light CCP). Meanwhile, the CCP will only be involved in conducting the calculations solely on the basis of the contracts in which the CCP acts as a party to the settlements.
"The terms are critical to the success of the project. Therefore, it is important that in the coming years, provided the necessary prerequisites, the transfer of state and municipal bonds to the depositary from the NBU to the National Depositary has taken place, and the issue of the banking license of the the Settlement Cente has been resolved. There should be a concentration of corporate rights in the National Depository of Ukraine. If the plan is implemented in 2020, we will have the effect of the proposed model ", summed up the Head of the National Securities and Stock Market Commission.
The members of the Financial Stability Council paid much attention to discussion of the legal status of Bitcoin and other cryptocurrency in Ukraine, regulation and taxation of operations with it.
During the discussion, the participants noted the importance of the IT industry for the development of the Ukrainian economy. The state is interested in further development of this sector and creation of favorable conditions for promotion of innovation, therefore the members of the council have agreed to find the optimal solution and common position of financial market regulators regarding cryptocurrencies.
Members of the Financial Stability Council specified a variety of approaches to determining the status of cryptocurrencies and regulatory approaches in different countries around the world. For instance, in the European Union, Bitcoin does not have the legal status of currency or money but it is accepted by individuals and legal entities as a medium of exchange and can be transferred, stored or sold electronically.
As a result of the discussion, the members of the Financial Stability Council decided that a more thorough analysis of the legal status of Bitcoin and other cryptocurrencies in Ukraine and in the world is necessary. The results of the analysis will be the basis for further developments in the legal and regulatory framework. A working group will be established to do that. It is planned to engage to the discussion not only representatives of financial market regulators but also experts.
Financial Stability Council
The Financial Stability Council was established by the Presidential Decree in March 2015. The Board comprises the Governor of the National Bank of Ukraine, the Minister of Finance of Ukraine (co-chairs of the Board), Head of the National Securities and Stock Market Commission, Head of the National Financial Services Commission, Managing Director of the Deposit Guarantee Fund, First Deputy Governor of the National Bank of Ukraine, and Deputy Minister of Finance of Ukraine.
The Council provides a forum for professional discussion of risks posing a threat to the country’s financial stability. The next meeting has been scheduled for October 2017.