Modernization of the Foreign Exchange Policy Instruments of the National Bank of Ukraine in the Context of Economic Digitalization

Abstract

The purpose of the article is to assess the compliance of the foreign exchange policy instruments of the National Bank of Ukraine with the requirements of the digital economy and to identify the directions for their modernization based on an analysis of international experience. The study employs methods of systemic and comparative analysis, and generalization. Four digitalization factors affecting foreign exchange policy instruments have been identified: the emergence of private digital assets (cryptocurrencies and stablecoins), the introduction of central bank digital currencies (CBDCs), RegTech and SupTech technologies, and the transition to electronic platforms and algorithmic execution of transactions in foreign exchange markets. It has been established that the effectiveness of the policy rate as a foreign exchange policy instrument is constrained by the significant volume of financial transactions outside the banking system — the volume of cryptocurrency transactions by Ukrainian users for July 2023 — June 2024 amounted to an equivalent of USD 106.1 billion, while the Quarterly Projection Model (QPM+) does not account for crypto asset transactions. The NBU's foreign exchange interventions retain a discretionary nature amid the digital transformation of global foreign exchange markets; the NBU's accession to the FX Global Code represents an important practical step towards international standards of the digitalized market. Traditional capital flow management measures (CFMs) demonstrate systemic inefficiency with respect to cross-border crypto asset flows, as stablecoins and other crypto assets operate outside the banking system — the key link in foreign exchange supervision. The e-hryvnia is at the stage of conceptual development; its practical significance as a foreign exchange policy instrument will depend on the level of trust in the national currency under conditions of prolonged war. The foreign exchange policy toolkit of the NBU partially meets the requirements of the digital economy; the systemic unresolved problem remains the absence of regulatory coverage of the crypto market, which constrains the effectiveness of all three traditional instruments. The directions for modernization identified include: introduction of AI-based monitoring of crypto market transactions; adaptation of foreign exchange interventions to the standards of the FX Global Code; implementation of RegTech and SupTech technologies into the foreign exchange supervisory framework in accordance with the NBU Green Paper on Regulatory Technology Development.