RETROSPECTIVE ANALYSIS OF CURRENCY RESTRICTIONS UNDER A LIBERAL SYSTEM OF CURRENCY REGULATION IN UKRAINE

Author
, Postgraduate student of the Department of Financial Law, Ukraine, Kharkiv

In heading

 Law;

Signed print

 25.03.2025

Issues number

 2025 - № 1 (60)

Page

 97-122

Type of articles

 Scientific article

Code UDK

 347.73:339.74](477)

ISSN print

 2411-5584

Abstract

 Problem setting. Currency restrictions as an administrative instrument of currency regulation are established by the NBU through the introduction of protective measures corresponding to the law. The change in the content of currency regulation prompts the study of currency restrictions under the conditions of the liberal system of regulating currency relations, taking into account the abolished restrictions of the previous system and the restrictions introduced in connection with the introduction of the legal regime of martial law.
Recent research and publication analysis. The content and multi-vector problems of currency regulation have been the subject of consideration by many researchers. First, all authors agree that currency restrictions are an effective measure in periods of economic instability or crisis, especially for stabilizing the exchange rate, preserving gold and foreign exchange reserves, and maintaining macroeconomic stability. Second, researchers also recognize that the strict currency restrictions and fixed exchange rate of the hryvnia introduced during the war helped stabilize the situation, reduce devaluation expectations and inflation. Third, researchers emphasize that currency restrictions should be temporary and aimed at resolving crisis situations.
At the same time, scientists’ opinions also have the opposite direction when assessing certain measures. Significantly scientists are also not unanimous in their recommendations regarding further actions in the context of applying currency restrictions.
Paper objective. The purpose of the article is to conduct a temporal analysis of currency restrictions in the context of the implementation of a liberal system of currency regulation in Ukraine. We aim to achieve this goal by implementing the following tasks: to analyze the currency restrictions abolished from February 07, 2019; to analyze the currency restrictions that came into effect from February 07, 2019; to investigate the currency restrictions that have been in effect since the beginning of the full-scale invasion (February 24, 2022) and are still in effect in wartime; to compare the studied currency restrictions.
Paper main body. From February 7, 2019, through the adoption of the new Law “On Currency Regulation” No. 2473-VIII, a number of currency restrictions were abolished and a new liberal system of currency regulation was introduced.
In the period from February 07, 2019 until the start of the full-scale invasion, firstly, currency restrictions included those established by legislative acts in the areas of ensuring national security, preventing and countering the legalization (laundering) of proceeds from crime, or the financing of terrorism or the financing of the proliferation of weapons of mass destruction, as well as those determined by the state’s obligations under international treaties. Secondly, at this time, currency restrictions included those that may be established by the NBU.
Thus, in the context of the currency restrictions that were in effect from February 07, 2019, we emphasize that they acted as an administrative tool of currency regulation in the context of the liberalization of the currency system of Ukraine. These restrictions were aimed at supporting financial stability and strengthening confidence in the hryvnia. At the same time, they served as a barrier against sudden capital outflows and protected the economy from currency shocks. In the period up to February 24, 2022, Ukraine achieved significant progress in the liberalization of the foreign exchange market, which was a positive signal for investors and businesses.
The next step is to study the currency restrictions that have become a challenge since the beginning of the full-scale invasion and the introduction of martial law throughout the country. The Resolution of the NBU Board “On the Operation of the Banking System during the Period of Martial Law” dated February 24, 2022 No. 18 provided for currency restrictions, which were repeatedly changed during the three-year period of martial law.
Currency restrictions in Ukraine during the legal regime of martial law have strategic importance for maintaining the country’s financial stability, preserving foreign exchange reserves, and ensuring the normal functioning of the economy in an emergency. The war significantly complicates the financial situation, causing a fall in the national currency, rising inflation, and instability in international financial markets.
Conclusion of the research. Having analyzed the currency restrictions over time, abolished on February 07, 2019, in force since February 07, 2019, and those introduced in connection with the introduction of the legal regime of martial law and, accordingly, currently in effect in the current conditions, we state the following.
Until February 02, 2019, currency regulation was carried out in accordance with the provisions of the Decree of the Cabinet of Ministers of Ukraine of 1993, which provided for the application of strict restrictions that ensured control over the outflow of currency, but created administrative pressure on business.
After the adoption of Law No. 2473-VIII, which liberalized the exchange market, the mandatory sale of foreign exchange earnings was abolished, most licensing requirements were lifted, and settlement deadlines were simplified (up to 365 days). Liberalization contributed to Ukraine’s integration into the global financial system, made it easier to do business, but left the space for the introduction of restrictions in crisis conditions.
From the beginning of the large-scale invasion (and as of early 2025), fairly strict currency restrictions were introduced. These measures helped stabilize the hryvnia, reduce inflation, preserve gold and foreign exchange reserves, and avoid financial collapse, but they created risks of shadowing the economy and depletion of reserves.
Thus, until February 07, 2019, strict regulation protected the economy in crises, but created barriers for business. Since February 7, 2019, liberalization has contributed to the development of the financial system, but during the legal regime of martial law, restrictions have become a critically important tool for financial stability in emergency conditions.
Short abstract for an article
Abstract. A comprehensive chronological analysis of currency restrictions in Ukraine in the context of the transformation of currency regulation from a strict system to a liberalized model, currently enshrined in the Law of Ukraine “On Currency and Currency Operations”, is carried out in the article. The main principles of the new Ukrainian currency regulation system are indicated, in particular, freedom of currency transactions, risk-based, transparency, independence and market orientation. Particular attention is paid to the changes that occurred after February 7, 2019, including the list of abolished currency restrictions, the introduction of electronic limits and market liberalization. The currency restrictions introduced during the full-scale Russian invasion of Ukraine, which acquired strategic importance for ensuring financial stability, supporting the national currency and protecting foreign exchange reserves, are studied. It is shown that currency restrictions in the context of a full-scale invasion perform the function of a crisis tool, although their prolonged use creates risks for the growth of the state’s economy. Scientific approaches to the assessment of currency restrictions and their effectiveness are considered. Methodologically, the study is based on a combination of general scientific, special legal and empirical methods. The understanding of the role of currency restrictions in new legal and economic conditions is indicated.

Keywords

 currency relations, legal regulation, currency, currency values, currency transactions, National Bank of Ukraine, banks, currency system, protective measures,
martial law, financial stability.

Reviewer

External reviewer

Article in PDF

 Economic Theory and Law, 1-2025-97-122

Bibliography

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Code DOI

 https://doi.org/10.31359/2411-5584-2025-60-1-97

This post is also available in: Ukrainian

25.03.2025