On 21 June 2018 the Parliament adopted the new framework currency control law “On Currency and Currency Transactions” (the “Law”), which marks the commencement of a major reform of currency control legislation in Ukraine since its independence. The Law lays down the foundation for currency transactions and cross-border currency control in Ukraine and, upon entry into force, will replace in full the 1993 Currency Control Decree. To enter into force, the Law must be signed by the President and published, and there may also be a certain transition period before the Law becomes fully operational.
The Law declares the transition of Ukraine’s currency control policy from state to market self-regulation based on the following key principles:
a. Free movement of capital. This principle guarantees the right of Ukrainian and foreign persons to transact in foreign and local currencies, open bank accounts in Ukraine and abroad, make cross-border investments, and transfer currency freely without state interventions and restrictions, except for cases when the stability of the sovereign financial system is threatened.
b. Risk orientation, transparency and efficiency. This principle aims to ensure any currency-control restrictive measures must be (i) proportionate and not more than necessary to manage the threatened risks to the financial stability, (ii) well-substantiated and (iii) temporary. It remains to be seen how the National Bank of Ukraine will implement this principle in the currency control regulations once the Law becomes effective.
c. Market self-regulation. The aim of this principle of a self-regulating market is to bring about floating exchange rates and give independence to the National Bank of Ukraine to implement currency and monetary policies.
The Law is a long-awaited step and a sign of Ukraine’s continued commitment to reforms to improve the investment climate and access to finance. We continue monitoring the status of the Law and related developments for any impact on our clients and their businesses.