NBU Limits P2P Transfers: Implications for Crypto Users

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The National Bank of Ukraine has introduced restrictions on card-to-card transfers between individuals, aiming to combat fraudulent activities that impact both ordinary citizens and the state's security.

What prompted these restrictions?

The NBU's decision stems from a significant rise in fraudulent bank card transactions amounting to tens of billions of hryvnias. Criminals use these operations for theft, tax evasion, funding illegal activities, and even supporting the actions of a foreign aggressor.

Criminals typically use drop accounts, where they pay individuals a fee to use their bank accounts for unauthorized transactions. These accounts are often owned by vulnerable groups such as pensioners, students, and displaced persons. These drop accounts see hundreds of transactions in short periods, with transaction volumes vastly exceeding the legitimate income of the account holders. For example, some students have reported incomes of up to 200,000 UAH per month. Some participants knowingly engage with criminals, while others fall victim to social engineering without fully understanding the implications.

According to the bill's authors, a substantial portion of these funds are channeled to gambling, drug trafficking, and entities influenced by Russia. It is also noted that part of this money represents undeclared wages paid by employers avoiding taxes.

The National Bank identifies tens of thousands of personal accounts each month used as transit hubs for laundering criminally obtained funds. Lawmakers argue that such schemes not only inflict major economic losses but also pose a significant threat to national security during wartime.

How will these restrictions be implemented?

The restrictions proposed by the National Bank of Ukraine involve setting limits on the amount and number of P2P transfers from one account per month. The expected limits are 100,000 UAH and 30 transactions, respectively. 

In theory, these limits should not affect the majority of citizens who use their cards for everyday payments and transfers to relatives. Instead, they are intended as significant obstacles for fraudsters, complicating their ability to carry out criminal schemes.

National Bank officials also emphasize the importance of donations to support the Ukrainian Armed Forces, ensuring that the new rules will not affect this ability. Citizens will still be able to transfer money to accounts of foundations and volunteer organizations without any restrictions, as only outbound transfers are monitored, not incoming ones. 

What about crypto transfers?

Although the term "cryptocurrency" was not explicitly mentioned during the legislative discussions, it is evident that crypto exchanges will be impacted. Most exchange points, listed on the popular aggregator BestChange, use drop accounts for conducting financial transactions. For now, we won't delve into the ethical aspect of this method, simply recognizing it as a fact. Under the current circumstances, it's hard to expect that all exchange operators will function transparently, revealing the true scope of their daily transactions. Most likely, the majority of Ukrainian exchanges will have to cease operations, potentially replaced by Russian and Belarusian teams that manage to conduct payments to Ukrainian bank accounts without hindrance. How they achieve this is a question better directed to the National Anti-Corruption Bureau of Ukraine.

Moreover, the workings of P2P services on Ukrainian cryptocurrency exchanges remain uncertain.

In theory, these platforms facilitate direct transactions between individuals, with the exchange itself only acting as a guarantor of the transaction's security. Practically, it is challenging to find someone at any moment who can offer a substantial variety of required assets in significant amounts. More often, it involves a group of people who control a large amount of cryptocurrency because they regularly engage in such exchanges. Consequently, they could easily hit the monthly limit of 30 transfers in just one day.

What should someone wanting to convert cryptocurrency into fiat currency do in this scenario? They will likely turn to foreign platforms or resort to the black market, risking the loss of their funds.

Overall, this initiative poses many questions and offers few answers. However, there's still hope that the situation may not be as dire as it appears. The National Bank of Ukraine plans to release detailed information about the proposed limitations and hold discussions with reputable market participants. The final decision will be made after a thorough analysis and consideration of all parties' viewpoints. The enactment of the final version of the law is expected to take place within a month.