Monobank’s internal rules mention a ban on crypto exchanges — but no such ban exists

In the internal rules of the popular Ukrainian online bank Monobank, it states that the bank cannot process SWIFT payments if ‘there is a suspicion that they are connected with activities prohibited by the laws in force in Ukraine.’ The list of such activities includes crypto exchanges and electronic currencies. Given the absence of a statutory ban on cryptocurrencies or on the operation of crypto exchanges in Ukraine, ForkLog’s editors sought to determine the bank’s basis for its policy.

Representatives of Monobank refer to the National Bank of Ukraine’s regulations, including the NBU Board Resolution No. 496 of 29 December 2007, and mention the term quasi-currencies. The cited resolution has been repealed in February 2019, according to NBU Resolution No. 31.

It is not clear on what basis Monobank interprets cryptocurrencies as quasi-currencies within the bank, and they gave little comment on their approach to cryptocurrency-related payments in the absence of a legal ban.

‘Each operation of this kind has individual properties and conditions, so each time it is necessary to investigate what happened and consider many factors,’ said a customer-support representative named Badri.

According to the Kuna cryptocurrency exchange, Monobank cards are the second-most popular method of paying for cryptocurrencies on the platform. They account for 23.6% of input funds and 26.91% of withdrawals. Kuna’s head Mikhail Chobanian explained the rising popularity of Monobank by the absence of additional fees and fewer transaction blocks.

‘The new anti-money-laundering law took effect in April and, for the first time, brought cryptocurrencies into the national legal framework. In this matter, Ukraine, like many other countries, has based its approach on FATF recommendations: the term ‘virtual assets’ is used to designate cryptocurrency, which covers not only cryptocurrencies but other types of assets.

Together with cryptocurrency, the Ukrainian legal framework has also seen providers of services related to the turnover of virtual assets. It is this category that includes cryptocurrency exchanges.

Thus, at present the law not only does not prohibit, but explicitly contemplates the possibility of conducting various operations with cryptocurrency as a virtual asset. At the legal level, cryptocurrency is not considered monetary surrogate or quasi-money. Cryptocurrencies are an asset, and in civil circulation – a commodity,’ commented on the current legal status of cryptocurrencies in Ukraine partner of the law firm AURUM Sergey Ostrovsky.

Ostrovsky added that banks can independently classify cryptocurrency-related transactions as high risk or suspicious and block them on that basis.

‘The law allows each bank to decide for itself which operations to deem risky and which to deem not, and, unfortunately, this approach to cryptocurrencies is not unique to Monobank.’

On 28 April, Ukraine’s law on countering money laundering and financing of terrorism came into force. It recognises virtual assets (VAs) as property that can be used for payment and investment purposes. Meanwhile, VA financial monitoring has been postponed until the Ministry of Digital Transformation approves its procedures, which has already signed a memorandum with the Crystal Blockchain analytics service. The latter’s staff will train officials to track transactions in digital assets.

‘Law No. 2179 (act 361-IV) has already come into force, and this law contains the term ‘virtual assets (VA)’ and ‘providers of services related to the turnover of VA’ in the context of financial monitoring. To implement the norms of this law, the NBU adopted on 21 May a new procedure for banks’ financial monitoring, where the activity of banking clients operating in the VA space is classified as high-risk. Based on all the above, we do not believe Monobank has legal grounds to deny its clients who operate in the VA space, among whom cryptocurrencies are included, among other things,’ said Konstantin Yarmolenko, head of the advisory group of the inter-factional association of People’s Deputies Blockchain4Ukraine.

In mid-May, the Ministry of Digital Transformation released the bill ‘On Virtual Assets’ for public discussion, and less than a month later it was submitted to the Verkhovna Rada. In the same period, the NBU recognised cryptocurrency operations as high risk.

More on the bill ‘On Virtual Assets’, which will legalise Bitcoin in Ukraine, read here, here and here.

Also in January, the world-leading Bitcoin exchange Binance opened an account in the Ukrainian bank IBOX, as Deputy Minister of Digital Transformation Oleksandr Bornyakov said at the time.

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