The case of Ukraine effectively illustrates both the challenges associated with traditional economic policy decisions and the potential benefits associated with bitcoin. The predominance of the paper system and centralized administration created the following problems in the country:
The average inflation rate in Ukraine over the past ten years is 11.2% per year. Such high inflation has a negative impact on savings and long-term investments in strategic projects.
According to the Economic Freedom Index 2021, Ukraine’s economy is characterized mainly as not free, with the lowest indicators in the sectors of investment and financial freedom. With an undeveloped stock market and an unstable banking system, ordinary citizens have minimal opportunities for effective investment.
The large-scale crisis of the post-Soviet “solidary pension system”, exacerbated by demographic problems, led to the fact that 80% of single pensioners fell below the poverty line, and Prime Minister Denys Shmyhal warned about the risks of the state’s insolvency on pensions at 15 years old. This situation directly affects both current pensioners and all working people.
While the ineffectiveness of traditional centralized approaches is generally acknowledged even by government officials, the growing adoption of Bitcoin in Ukraine could provide unique opportunities for ordinary citizens and innovative startups.
Bitcoin allows for a deflationary economic environment for its owners. Bitcoin has risen in price against the Ukrainian national currency hryvnia by about 17,000% since its inception in 2009. Thus, each person gets an adequate opportunity not only to protect his savings from inflation but also to enjoy a significant increase in investment funds in subsequent years.
The decentralized nature of Bitcoin makes it accessible to all people around the world, although some governments impose restrictions in this area. However, most authorities, including the government of Ukraine, recognize the emergence of a new economic reality and have legalized bitcoin. For this reason, even despite the existing regulatory problems with open markets in the country, Ukrainians can effectively integrate into the global financial and innovation system.
Startups can effectively present their innovations to foreign partners and strategic investors. Blockchain technologies contribute to the growth of demand for new projects based on peer-to-peer networks and cryptographic keys. Thus, the rate of capital accumulation can increase proportionally with positive consequences for various sectors of the Ukrainian economy.
Bitcoin also creates additional opportunities to minimize the prevalence of corruption and all sorts of government inefficiencies. According to recent statements, Ukrainian government officials hold approximately 46,351 BTC, which implies their recognition of the unique advantages of Bitcoin as a store of value and decentralized blockchain system. A growing consensus around bitcoin among both the public and private sectors is critical to transforming Ukraine into a more open society with basic economic rights recognized for all citizens.
Regardless of progress in implementing government reforms, current employees can invest their funds in bitcoin in order to accumulate enough savings that will allow them to increase the purchasing power of their assets in the long term. The most important aspect is that each person gets the opportunity to independently and effectively ensure their financial stability, and not remain a passive object of state policy.
Bitcoin significantly affects the intellectual climate in Ukraine, creating an increased demand for the quality of cryptocurrency analytics. Bitcoin Magazine recently established a news bureau in Ukraine that can provide informational assistance in expanding the adoption of Bitcoin in Eastern Europe and the CIS region. Bitcoin Magazine CEO David Bailey emphasized the critical role of developing countries such as El Salvador and Ukraine in shaping the future of money.
The above assessment indicates that developing countries are experiencing the greatest need to take advantage of the unique financial and technological opportunities associated with the adoption of bitcoins by their residents. The case of Ukraine proves the possibility of a rapid transformation of the regulatory, institutional and intellectual environment under the influence of innovative and decentralized solutions. Higher rates of innovation and capital accumulation can boost national and global resilience, with the economic freedom of each individual being given top priority.