The Verkhovna Rada of Ukraine has adopted the Law of Ukraine "On Currency and Currency Operations" ("Law"), aimed at liberalizing Ukrainian currency control regulations. The Law replaces orthodox forex regulation1 by setting out new core principles and environment for currency transactions.

To come into full force, the Law still needs to be signed by the President of Ukraine. Once signed, the Law will become effective following its promulgation, however will become operative after the expiration of 7 months transition period. Within such transition period relevant secondary legislation of the National Bank and other authorities must be brought in line with the Law. 

Free movement of currency

The most significant changes for Ukrainian residents (both individuals and corporates) under new Law include the right to:

•         maintain offshore accounts with foreign banks;
   
•         make investments in foreign assets such as securities, real estate;
   
•         incorporate foreign legal entities, representative offices and branches.

Presently all above transactions require an individual license from the National Bank.

Secondly, under new Law it is permissible for Ukrainian non-residents to maintain local bank accounts in Ukraine on the same footing as residents of Ukraine.

Finally, the cross-border loans make available by offshore lenders to Ukrainian borrowers will no longer require registration with the National Bank. 

Settlements in Ukraine

Although Ukrainian Hryvnia remains the only legal settlement currency within Ukraine, the Law, however, sets out a range of carve-outs permitting to use foreign currency for settlements in Ukraine, such as:

transactions related to foreign investment in Ukraine (eg repatriation of proceeds);

transactions of certain regulated entities (bank and non-banking financial institutions) on providing banking and other financial services based on a respective license;

securities trades (placement, coupon (yield) payment and redemption of foreign currency denominated bonds and sale and purchase of government securities);

other types of transactions set out by the Customs Code of Ukraine and/or the National Bank.

Cancellation of 180-days settlement rule

The Law repeals the 180-days settlement rule, consequently contractual parties are no longer required to make settlement under the export and import agreements within the above term. However, the National Bank of Ukraine will retain the powers to set deadlines for settlements under export and import transactions and to determine minimal thresholds for the payments in excess of which such deadlines will apply.

Currency oversight: in-scope transactions

The currency control will be substituted with the currency oversight, which will screen the export/import transactions in excess of UAH 150,000. The currency oversight agents (such as banks and licensed non-banking financial institutions) would still be entitled to request their customers to deliver documents on currency transactions.

One rules of conduct for license

Instead of a wide range of different licenses depending on nature of a given payment or transaction, the Law provides for one type of license for conducting currency transaction, which would be required for any non-banking financial institutions intending to perform such transactions as foreign currency trading in cash, money transfers, factoring and other. The license for conducting currency transaction will be issued without a fixed term.

The Law does not require for Ukrainian banks to obtain licenses for conducting currency transactions and the above types of activities will be carried out based on the banking license only.

Central bank’s resilient powers and measures

The National Bank of Ukraine is entitled to impose temporary currency restrictions in certain circumstances specified by Law for the period of up to 6 months with the possibility of extension up to 18 months. However, currency restrictions introduced on the date when the Law becomes operative may be effective until their cancellation by the National Bank. 

Decree of the Cabinet of Ministers of Ukraine "On System of Currency Regulation and Currency Control" No. 15-93 dated 19 February 1993, Law of Ukraine "On Procedure for Settlements in Foreign Currency" No. 185/94-BP dated 23 September 1994.