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THE NATIONAL BANK OF UKRAINE HAS SHED SOME LIGHT ON THE FUTURE OF CURRENCY REGULATION
Asters, Kyiv, Ukraine,
Fri, Sep 28, 2018
As a next step following the adoption of the new Law on Currency and Currency Operations (the "Law") the National Bank of Ukraine (the "NBU") has commenced its work on shaping the system of regulatory limits in transactions with the hard currency. This Law will come into force on 7 February 2019. For more background information on this legislation, please see an article written by Constantin Solyar for Business Ukraine.
The preliminary results of the NBU's work were publicly presented on 17 September 2018. Some of the presented initiatives (like (i) termination of the system of draconian sanctions for "currency control" violations and (ii) cancellation of "currency" supervision for relatively small export/import transactions below UAH 150,000 threshold) were already in the Law.
Below we provide a brief outline of some noteworthy changes presented by the NBU.
1. Simplification of the regulatory environment
The NBU intends to enact seven new key regulations that will replace a current package comprising of more than fifty regulatory acts in this field. These new seven regulations are expected to address the most important issues of currency regulation, like setting up rules and structure for the currency exchange market, stipulating procedure and deadlines for cross-border settlements, introducing NBU's safeguard measures and procedures for their implementation, etc.
2. Some of prohibitory measures
■ Deadlines for settlements under cross-border contracts
NBU plans to introduce a 365-day deadline for making settlements under the cross-border contracts. Currently the similar limit is 180 days. The new limit is expected to apply starting from 7 February 2019.
■ E-limits system
Though it was initially proclaimed that the individual licenses may be completely abolished as soon as the Law comes into effect, it is now clear that the NBU intends to substitute such licenses with the so-called "e-limits system". It appears that this new system will set up new rules for the Ukrainian legal entities willing to invest abroad, place money with foreign banks, provide loans to non-residents, make monetary contributions to charter capital of foreign entities, etc.
The current system of "electronic" licenses for the Ukrainian individuals (e.g., foreign investment up to USD 50,000 annual threshold) should remain intact.
Since the abovementioned prohibitory measures are expected to take effect simultaneously with the Law, the NBU seems to exploit a loophole in this Law allowing the regulator to keep the prohibitory measures in force permanently and to avoid the statutory timing limits stipulated by the Law for such prohibitive measures (i.e., 18 months in any two-year period).