ODESA – Ukraine, which has one of the world’s most restrictive foreign policy regimes, is preparing a complete policy turnaround,

according to Oleg Churiy, deputy governor of National Bank of Ukraine.

“The legislation we have now is totally repressive --

every transaction involving foreign exchange needs permission,”

Churiy told the Ukrainian Financial Forum, sponsored by ICU investment bank. “In the future, it will be: ‘everything is allowed that is not prohibited.’”

Oleg Churiy believes the Rada will pass the new foreign exchange law this fall (James Brooke)

The ideological reversal -- to an almost libertarian approach -- was captured in the foreign exchange draft bill that the central bank prepared after a year of hearings and discussions with investors, exporters and lawmakers.

“After one year, we produced a 10-page law,” recalled Churiy, a power at the bank since Valeriya Hontareva resigned five months ago. “We got comments like ‘it’s not clear what you guys have been doing for one year.’”

Although some Ukrainian officials feel more comfortable with micromanaging, the bill seems to have a good chance to become law of the land by the end of this year.

“Authorizing all that is not prohibited – that matches EU directives,” Ruslan Demchak, deputy chairman of the Rada committee on finance and banking policy, told the investor gathering here Friday afternoon.

Churiy said the draft bill is generating business enthusiasm. This, he said, translates into “the likelihood of getting the law approved through parliament.”

Sun Shines on Ukraine

The economic timing is right, the central banker said.

“Ukraine in is its most favorable position in the last 10 years,” said Churiy who has worked in Ukraine private and public banking for 24 years.

“We have growing exports, inflation has been suppressed quite significantly – to about 10 percent this year -- volatility in the foreign exchange market dropped, reserves will hit $20 billion by the end of this year,” he said. “All these improvements allow us to remove restrictions.”

There is trust in the hryvnia, he claimed. After two years of the exchange rate hovering between 25 and 26 hryvnia to the dollar, half of deposits in banks in Ukraine are now in hryvnia.

The new regime is designed to allow the free flow of capital in and out of the country, provided that the origin of the capital is documented to minimize money laundering.

“We will remove the currency restrictions on insignificant transactions, below UAH 150,000,” Churiy said, referring to an amount worth around $5,700.

Oleg Churiy, a veteran of 24 years in Kyiv banking, has become the voice and face of the National Bank of Ukraine, since Valeriya Hontareva, the last Governor, resigned in April. (UNIAN/Alexander Sinitsa)

If there is a crisis, similar to the 2014-2015 one provoked by Russia’s military intervention, the central bank will have the power to power to temporarily restore controls.

Timur Khromaev, chairman of the National Securities and Stock Market Commission, cautioned that Ukraine’s new foreign exchange regime will have to conform with world norms.

“It is great when we are not going to have restrictions,” he told the Forum. “But the world financial market works on rules.”

Timur Khromaev, chairman of the National Securities and Stock Market Commission, wants to see Ukraine’s four stock markets consolidated into one. (James Brooke)

Cold Water Poured on Crypto Currencies

Later, at separate panel, Churiy joined American and Chinese critics of crypto currencies, such as bitcoins. These electronic currencies have become popular in Ukraine this year as business people look for ways around the nation’s strict foreign exchange controls.

"World regulators are not concerned with any threat of crypto currency because of small volumes,” the central banker said. “They are concerned only with the fact that people can lose money and become victims of fraud.”

“We can say that it is definitely not a currency, as it has no central issuer,” he added. “We also cannot recognize crypto currency as means of payment.”

Khromayev, the Securities Commission chair, agreed, warning of the volatile crypto currencies: “There is no information support or investor protection.”

For comments and story tips, email UBJ Editor in Chief James Brooke at james.brooke@theubj.com