Will War-Torn, Power-Starved Ukraine Be World’s First Cashless Economy? (Serious Question)

Zelensky is reportedly “very determined” to move towards a cashless economy as swiftly as possible. And he has the full support of Australia’s richest man. 

Cash has a new enemy: the government of Ukraine.

In a panel discussion at the Ukraine Recovery Conference, held in London a couple of weeks ago to drum up support and funding for the imaginary construct that is Ukraine’s post-war recovery, the Deputy Chairman of the Office of the President of Ukraine, Rostyslav Shurma, said Kiev is seriously considering banning cash. Doing so could, he said, reduce the country’s corruption problems by between 95-99%. The effort would form part of the Zelensky government’s sweeping US, EU and UN-funded digital governance agenda (which we previously covered here, here and here).

Everybody knows about the progress we have done with Diia [Ukraine’s digital ID and governance platform] and the digitisation of public services. We plan only to enhance the speed of the public services we will provide [this way] because the logic is very simple: if there is no physical contact with the bureaucrat, there is no risk of corruption.

There is one more important step that I believe we will take. I cannot tell you definitely that we will do [it] because it is still under discussion — but under very deep, very serious discussion with the whole team including the president and prime minister. We want to be the first fully cashless economy.

We know there is a lot of debate about this from the different stakeholders that we are eliminating the rights of the people with no cash. But we believe this will be a very effective tool to eliminate, I think, 95 to 99% of all corruption cases in the country if there is no cash at all.

This is bonkers, of course. Bonkers for the absurd numbers (95-99%) cited as well as the implied notion that a cash-free Ukraine would suddenly be cleansed of all corruption, as if cash were the only financial conduit by which bribes or kickbacks are paid. Bonkers also because Ukraine is still a heavily cash-based economy where physical money accounts for between 40-50% of Ukraine’s M1 money supply (currency, demand deposits and other liquid deposits), according to Vitaliy Shapran, a former member of the National Bank of Ukraine Council. That compares to 15-20% in neighbouring Georgia and 0.5% in Sweden, one of the world’s most cashless economies.

While it may be desirable for cash’s share of the money supply to shrink, getting rid of it entirely is simply not realistic, Shapran told Focus Ukraine, a blog of the Kennan Institute of the Woodrow Wilson International Center for Scholars. For a start, it would leave many of the country’s pensioners with no means of accessing or using money. Then there’s the fact that huge swathes of Ukraine’s territory are currently a battleground for a proxy war of attrition between Russia and the Collective West that has no clear end in sight.

One major victim of that war is Ukraine’s power grid, which is routinely targeted by Russian forces. As a result, the country continues to suffer rolling power blackouts and internet outages. According to its energy minister, Ukraine is conducting the largest campaign of repairs in modern history to its power system in preparation for another winter of Russian airstrikes. As Yves noted in her Nov 3. piece, Has Russia Already Pwnd Ukraine?, it would seem that “the most efficient way for Ukraine to restore the grid (and remember no rebuild will be terribly efficient) would be to get the needed equipment from Russia.” Suffice to say that is not going to happen.

In any remotely sane world, this would immediately disqualify Ukraine as even an outside contender for the planet’s first fully cashless economy. But as readers may have noticed, this is not a sane world, especially when it comes to “Project Ukraine” (h/t Benny Profane).

Building the “Most Convenient Digital State in the World.” At What Cost?

Ominously, Shurma is not the only senior government official in Kiev talking about the need to eliminate cash. The Deputy Minister for the Economy Oleksandr Gryban recently said Zelensky was “very determined” to move towards a cashless economy and the government would “make everything to make it happen as soon as possible”.

“This is a clear intention of the president, I assure you,” Gryban said. “He does understand that a number of problems were driven by cash, so one of the last meetings he was managing, cashless economy was just one of the main pillars for the future economic transformation.”

Ukraine’s “Diia” digital ID and governance platform predates the conflict with Russia, but as I noted in my previous post, USAID Quietly Unveils Plans to Export Ukraine’s Digital Governance Model Around World, it has been significantly expanded since the hostilities began, in the eternal spirit of never letting a good crisis go to waste:

Just as the combat theatres of Iraq and Afghanistan served as testing grounds for the mass harvesting and storage of sensitive biometric data, some of which fell into the hands of the Taliban when the US abandoned Afghanistan, war-torn Ukraine is being used to pilot the rapid construction of an all-encompassing digital governance system.

A fully functioning ID system is a prerequisite for launching a central bank digital currency. In December last year, the National Bank of Ukraine (NBU) unveiled its draft concept for developing a CBDC known as the digital hryvnia or the e-hryvnia. Oleksiy Shaban, Deputy Chairman of the NBU, described it as “the next step in the evolution of the payment infrastructure of Ukraine.”

Most of the money used to bankroll Ukraine’s “state in a smartphone” model of governance has come from Washington’s soft power arm, USAID, while US mega-corps like BlackRock, JP Morgan and Mckinsey & Company stand to pocket much of the money raised for reconstruction. Other contributors include the European Union’s eu4digital initiative, the UN’s Development Program (UNDP) and the Swedish government. Their money has helped to build “the most convenient digital state in the world — without corruption, without bureaucracy, absolutely paperless, and open for everyone,” says Valeriya Ionan, the deputy minister of digital transformation.

Australia’s Richest Man Joins Fray

At this year’s annual meeting of the World Economic Forum in Davos in January, USAID’s administrator and inveterate neocon Samantha Power announced that Washington is hoping to export the “success” of Ukraine’s e-governance digital identity app, Diia to other countries around the world that are struggling with corruption. A few months later, UNDP said Diia is “ready to go international.”

One country that is currently working to replicate Ukraine’s digital ID system is Estonia, which is already one of the world’s most digitized countries. As Estonia’s Prime Minister Kaja Kallas noted a few months ago, the move represents a “new chapter” in the two countries’ digital cooperation.

Ukraine’s allies/backers/owners have at least two possible motives for wanting Ukraine to abandon cash: first, so that it can serve as a testing ground for a CBDC, just as it has done for digital identity; and second, to borrow from a recent article in the Sydney Morning Herald, to “avoid the corruption seen after the Iraq War, when reconstruction funds were used for bribes and kickbacks.” As the article points, Ukraine is still a hive of corruption, placing 116 out of 180 countries in Transparency International’s latest Corruption Perceptions Index.

In a bizarre twist, Ukraine’s plan to kill cash also enjoys the support of Australia’s richest man, Andrew “Twiggy” Forrest, who has launched a new investment fund for Ukraine’s reconstruction, kick-started with $500 million of funds from his private company, Tattarang. The fund will be operated by Ukraine’s Ministry for Economy and administered by the world’s largest asset manager, BlackRock. The Australian mining billionaire hopes funds from other investors of up to $US100 billion.

But on one condition: Kiev must first take out cash, thereby “put[ting] the nail in the coffin of corruption:

“That’s the point I’ve made to the Ukrainian government: cash will lead to corruption. Now here’s your opportunity to go cashless – there’s no reason to have cash in your society, none.”

A more blatant endorsement for the death of cash from a billionaire businessman you will be hard pressed to find. Even if Forrest’s faith was well placed and Ukraine was able to eliminate cash without visiting significant amounts of further pain, distress and devastation upon an economy that already shrank by around a third last year, the plan has one significant snag:

What About All the Physical Euros and Dollars?

As economic analyst Borys Kushniruk told Focus Ukraine, the proposed measure to take out cash will have little impact on political corruption, given that most bribes are paid in dollars and euros.  Cryptocurrencies are also becoming a popular payment method that is for the moment widely encouraged by Ukraine’s digital-friendly government (machine translated):

You can eliminate cash hryvnias, but not dollars and euros – the main currencies in which bribes are distributed. Hundreds of millions of dollars in cash are in the hands of Ukrainians. And times are also changing. Many people give bribes in cryptocurrency, making it even more difficult to catch them.

The idea of abolishing cash reflects a misunderstanding [among current officials] of the main economic uses of money. It has five interrelated functions: as a measure of value, a medium of exchange, a method of payment, a method of accumulation and international currency [for foreign trade, international loans, etc.].

If cash is abolished, said Kushniruk, people will inevitably need to introduce another means of payment, including presumably other physical currencies:

When someone wants to cancel something, they should understand that they will still have to ensure the functioning of the economy. Cash payments are an important component of the economy.

The First Deputy Head of the National Bank of Ukraine Kateryna Rozhkova appears to concur, cautioning that while the “banking system is ready” for a cashless economy “from the viewpoint of technology, inclusion and continuity,… I am not sure that we can claim to be ready to ensure a zero amount of cash in circulation.” She also noted that in some countries where cash had been reduced to minimal levels, “the population did not like it.”

In other words, the central bank does not seem to occupy the same ground as the Zelensky government on this issue, or at least does not view it with the same urgency. Meanwhile, the global race to elminate cash continues to gather pace. At its “Summer Davos” event last week, the World Economic Forum emphatically endorsed the adoption and proliferation of CBDCs. From the digital rights newsletter Reclaim the Net:

In a report, timed for release with the event this week, the WEF listed “advancing cashless societies” as one of the strong motivations for introducing CBDCs. “Focusing on reducing cash use, promoting digital payments and enhancing financial literacy to drive economic growth and increase efficiency, while balancing privacy concerns,” the report states.

Though it doesn’t say exactly how “balancing privacy concerns” will be addressed.

The conference this week brought attention to the stark reality of physical money becoming a relic, as Eswar Prasad, a Cornell University professor, emphasized during his speech.

Prasad enlightened the audience on the duality of CBDCs. He marveled at their potential benefits but also cautioned against the possible perils. One of the intriguing aspects of CBDCs, according to him, is their programmability. Governments could engineer these digital currencies with the ability to expire and to dictate what they can or cannot be used for.

“We are at the cusp of physical currency essentially disappearing,” said Prasad, thereby underlining the gravity of the situation.

War-torn Ukraine has already been used as a testing ground for digital identity and governance systems. Will it be used in the same way for CBDCs and cashless economics? The ever-obsequious Zelensky government certainly seems happy to offer its services, apparently regardless of the economic pain and fallout it will inflict.


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  1. viscaelpaviscaelvi

    It’s going to be a match made in heaven: a cashless economy hand in hand with the de-electrified zone that Russia is going to impose.
    Looking forward to seeing that.

    1. Skip Intro

      Indeed, it is more likely that the new cashless economy will use canned food and AK47 rounds as a medium of exchange. There may also be a glut of slightly questionable frozen whole fish harvested from the former reservoir.

    1. digi_owl

      That age old diesel generator will do nicely.

      I’m sure Russia will be happy to sell some.

  2. The Rev Kev

    This all goes to show you, billionaires are not your friend no matter where they come from. American, British, Australian, French – they are all the same. Think that those Ukrainian troops will be happy to be paid in 1s and 0s? I can see how this would work out. So Big Z would get a panicked call from the Army Chief of Staff saying that the soldiers are deserting their positions in their thousands. When Z asks if it is because of Russian artillery, drones or some new wonder weapon, would be told ‘No sir. The Russians are offering a 1,000 dollar desertion bonuses – and they are paying in Ruble notes!’

  3. flora

    Interesting idea: make Europe’s most corrupt country by all accounts, before the current unpleasantness started, into Europe’s first cashless economy. Would it be over-the-top to suggest that would be a test run for major corruption continuation in a cashless society? A chance for “da big guys” to test out continuing their various launderings and traffickings in crypto? (Although, I thought FTX was a good first test case. heh.) Already no one can account for all the money and materiel sent to Ukr.

    1. DJG, Reality Czar

      flora: Indeed. FTX came to mind as I read the article. All one has to do is wire a couple of billion euro, which somehow will mysteriously become untraceable.

      The corruption won’t stop. That doesn’t seem to be the point of what the Ukrainians are doing. It’s simply economic authoritarianism wrapped up in the usual Ukrainian “Freedom” packaging.

      1. hk

        However, it will make sure that corruption will “disappear,” because it’ll be impossible to find.

    2. Susan the other

      All of which makes me wonder if there was an order to this progression. The cashless go-ahead came after Z signed off Ukraine’s future to both our Treasury and Justice departments. Where all that national interest in the form of SOEs was sold off to the West’s big corporations. Or so I assume. Rock solid odiousness. There won’t be any sentient Ukrainians left anyway so who will complain? One tell is that all this frantic transfer of national wealth happened before any sort peace negotiations and afterward we started choking off military supplies.

  4. DJG, Reality Czar

    This post is excellent in showing just how deranged Project Ukraine is. (But, of course, I’m supposed to be looking for that Darn Vlad Putin under my bed.)

    –Ukraine has gutted labor law.
    –I hear that the Russian language is more or less prohibited.
    –The state is messing with the portion of the Orthodox Church that remains loyal to the Moscow patriarch.
    –The press is restricted, and journalists who want to work as journalists are occasionally assassinated. The currently missing Gonzalo Lira isn’t the first.
    –As Max Blumenthal has pointed out, Diia is just another extension of the surveillance state. And if your pension payments are flowing through Diia, one can imagine what will happen to one’s bank account if one steps out of line.
    –The cashless society as un-corrupt, as Nick Corbishley points out, isn’t just bonkers. It is an attempt to control people’s actions by monitoring their cash flows. Doing a little gambling? The Department of Moral Purity and Ukrainian Handicrafts will step in. Playing the ponies? The Department of Moral Rectitude and Ukrainian Dairy Products will step in. (I will assume that in all cashless societies prostitution / sexwork are legal and use point-of-sale devices. Oh, no? No?)
    –Did I mention those strapping blond Ukrainian niceNazis?

    And this all is being sold to the public as Victory for Freedom! It’s a neoliberal campaign to snuff out what is left of private life.

    Slava Diia!

    1. c_heale

      Most of the land also appears to be being sold off to Western “investors” too.

      1. gwb

        Yep – farmland is the underreported international asset grab taking place in Ukraine.

    2. The Rev Kev

      The boys at The Duran were saying that the religious icons that were stolen, err, confiscated from the Orthodox Church in the Ukraine have been taken to other countries ‘for the duration.’ The UK was one such destination and so was the Vatican and I think France as well. Maybe Italy too. Good luck ever getting them back again.

    3. chuck roast

      You remind us that before the carcass of this nation is interred a very competent forensic pathologist will be required to catalogue its multitude of mortal illnesses…if only as a warning to similarly inclined bodies. Unfortunately, I am only required to look out the window to see many of the same morbid symptoms in my own neighborhood.

  5. eg

    I’m not sure what to make of the quality of thinking which leads to the equation “zero cash = zero corruption”? These people clearly lack imagination, any understanding of history, and the first clues about human nature.

    Good grief …

    1. doug

      These people clearly lack imagination, any understanding of history, and the first clues about human nature.

      Another idea?
      These people understand human nature and are clearly lying through their teeth.

    2. Sibiriak

      Anti-corruption rhetoric is being used to package and popularize policies which advance the neoliberal surveillance state.

  6. Stephen

    An analogy might be appropriate. During the worst days of WW2 the British Government launched the Beveridge Report that laid the groundwork for the welfare state. A wartime white paper also presaged the creation of the NHS. These measures were clearly aimed at the needs of so called “ordinary” people and were not the pet projects of billionaires. Fast forward to today and it is hard to see how anyone would die in a trench in the cause of implementing a digital currency. Does not sound like the sort of thing that will have Crimeans repudiating Russia. But a British WW2 soldier might well have seen the elimination of poverty and bad health as worthwhile causes, however imperfectly we then went on to deal with those issues.

    On a similar note, I happened to be on a plane just a day or so ago flying to an Eastern European city from London. A number of people near me seemed to be associated with Chatham House, the British semi official think tank. These are people I would normally go a long way to avoid. They were talking about the imaginary Ukrainian reconstruction that you refer to. I guess they were heading to one of the many PMC feel good conferences to discuss reconstructing Ukraine and fighting Russia. Very indiscreetly, I might add, veering on being unprofessional. One of them used his mobile phone just before we got to the runway too. Ironically, he was lucky that we were not on a plane owned by a US airline, given how American crews tend to react..

    To give a sense of their priorities: they were very happy that lots of Ukrainian women show up to their events. But with respect to Hungary it is mainly men and they openly criticised Hungary for that and praised Ukraine. I am all for equality but maybe most of the men in Ukraine have either fled or are fighting, but that did not seem to concern these paragons of western propaganda narrative making. I can easily see why such characters would embrace digital currencies, especially if Australian billionaires provide donations.

    One of these people was also brandishing a paper from June 2023: “How to end Russia’s War on Ukraine: Safeguarding Europes future and the dangers of a false peace”. It is worth checking out on the Chatham House website but seems to be saying that only total Ukrainian victory over Russia is acceptable and anything else is a sell out. It has multiple authors who clearly make money by fomenting war, one of whom happens to have been a tutor of mine in Soviet Studies many years ago at Oxford. At that time I thought he was sensible but he is now funded to work for some Baltic States think tank (as well as Chatham House, it seems) and spouting pro war, anti Russia propaganda is presumably part of the deal.

    These people were also quite open more broadly in their conversation. At one point they discussed the Ukraine counter offensive and the “dangers” of peace negotiations. One of them then said that it needs to be seen as a series of offensives! That could go on for months, They also expressed indignation that Russia has any valid security concerns with respect to Ukraine and one of them said that nobody has ever articulated what they are. They then went on to discuss who should moderate some event and rejected various names as not being sufficiently “on side”. Clearly, these people want never ending war. It pays them and lets them feel relevant, I guess.

    I made a similar comment last night on the Simplicius site by the way. There is a good article there on Richard Haass, and the Council for Foreign Affairs seems to have similar lineage to Chatham House. The knowledge of that makes me quite ashamed to be British, frankly. We still seem to have many people who think they are running an empire and want to sort out everyone else’s affairs. Such people need to experience the reality themselves of what they foment from warm offices on laptops.

    1. Maxwell Johnston

      Thanks for this comment, made me laugh. It must have been trying to be stuck on an airplane with those people in earshot, but sometimes it’s instructive to watch them and hear them up close. Sort of like going on a safari.

      As for Nick Corbishley’s article: I can only say that in 20+ years of doing business in Russia, I saw very few bribes/kickbacks paid in cash. Most were done by wire transfer. Especially the big payments. In Russia (and I assume UKR is much the same), there exists a huge infrastructure of fake companies which exist for only a few weeks or months and are then liquidated. They exist in a purely legal sense (and have bank accounts and tax ID numbers), but they’re just paper companies. The sole reason for their existence is to launder money and enable corruption (all in rubles, no USD or EUR needed, thank you). The Russian government (or at least that part of it that desires to combat this problem) has made some progress by reducing the number of banks from over 1200 to just over 300 last time I checked, but the problem still exists.

      In short: eliminating cash has nothing to do with eliminating corruption. It’s a different agenda entirely.

      1. JBird4049

        >>>In short: eliminating cash has nothing to do with eliminating corruption. It’s a different agenda entirely.

        Control over the proles is what it is about. However, as others have mentioned, creaky infrastructure either by war or neglect poses problems. Those in charge insist on focusing only on both profits and control, while ignoring functionality and ruggedness.

        About using substitutions for the legal money and the trouble it can cause. One of the causes for the American Revolution was the British Parliament refusal to deal with the lack of legal, good quality, and affordable molasses, which could only be had from the French plantations in the Caribbean as the legal British sources were both more expensive and of poorer quality. The illegal molasses was made into rum by the colonists and used both as a substitute for the cash that was always in short supply locally and to trade with the British for the all the manufactured goods that they were not allowed to make. Friction increased from this when Parliament raised tariffs on the rum making it too expensive to sell legally, but making local wealthy supporters of MPs even wealthier. This meant that the American shippers had to smuggle the rum into Britain. As a result, the molasses smugglers became some of the wealthy elites in the American Colonies, particularly in New England, which had a robust shipping industry.

        When after a century, more or less, of semi official ignorance of the smuggling ended as the British government needed more revenue to pay for the debts from the Seven Years War and to build and man all the new fortifications needed to defend their newly won territories, the changes were done in a clumsy manor and without dealing with the colonial problems that had help to start the mess. The British started to arrest smugglers and impound their ships and cargos. Not only were the elite, wealthy shippers angry because it interfered with their profits, the shortage of cash and the lack of goods to sell to Britain both for the needed manufactured goods that the colonists were still prohibited from making and for some of the needed cash to bring back still remained.

        Yes, the Americans did not want to be taxed because greed and there was a strong desire to get the Indians’ land, but they also needed some form of exchange and a way to get the manufactured goods that they needed, which affected all Americans, and which the British refused to fix. The use of the navy, and then later the army, to enforce the prohibitions also made the Americans angry. If you want to get an idea of what tactics the British used trying to enforce their diktats, while not solving some real problems that the colonists had, read the Bill of Rights.

        It is interesting that the shortage of available cash in the colonies was not a deliberate act, but it was one that was not solved, leading, at least in part, to the sequence of responses and counter responses that caused the war. As far as I understand it, the British government never intended to irritate, suppress, and then cause a war; the government just honestly needed the money to pay the debts and to build up the forces to protect its new territories, and they were also honestly unhappy with to them childish, often illegal, responses of the colonists; their responses confused the colonists enough to think that the British government was being tyrannical, intended to suppress, and then to directly take over the colonies.

        Part of the confusion, I think, was that previously the individual colonial governments were tasked with raising funds and not the individual colonists. The British were really being less organized, tyrannical evil and more honestly confused, then angry, managers or taskmasters. It didn’t help that the most organized and competent British governmental body at the time was the Board of Trade and that the entire government otherwise was generally corrupt, and not that competent. Don’t get it wrong. There were very good, or at least determinedly honest, administrators in the government, but in a sea of corruption and somewhat ad hoc organization. Then add the contempt much of the British ruling class had for the Americans. The colonists, despite their misunderstandings of the central government’s action and making mistakes of their own, somewhat kept their goals in mind.

        Making everyone angry, even your strongest allies including at the time Benjamin Franklin and the loyalists as well, and then use heavy tactics to control them is not a good idea. Fortunately for the British, its government did learn from their mistakes, reformed the government and created the Second British Empire. I wonder if the collective West, we Americans, the British and the Europeans will get a another chance ourselves. It will be interesting to find out and it might make me some excellent papers in political science or political economy in the next few years. Although I really would prefer to make my papers from earlier, not current, events, but it might be too hard to resist.

    2. James

      Of course those men are concerned with the “dangers” of peace negotiations – they want all Ukrainian men dead so they have a chance with the Ukrainian women.

    3. JohnA

      RE the Beverage report that laid the groundwork for the welfare state.
      This was by no means an altruistic gesture by the Establishment. It was in response to the fact that, due to very poor diet and lack of decent healthcare, a high proportion of British men conscripted to fight the war were in such a bad state of health, they were totally unfit for service. The welfare state was created to ensure there would be sufficient manpower able to fight in the event of future conflicts.

      That has clearly now been forgotten by the neoliberals, as the poor once again descend into being forced to feed on unhealthy scraps and unable to access decent healthcare without a long wait.

  7. Candide

    Many thanks, Stephen, for this “fly on the wall” glimpse of ideological profiteers flocking to opportunities. These moments are not to be missed.
    On a parallel note, an uncommonly honest bit briefly appeared on NPR’s “Marketplace” as the destruction of Yugoslavia was winding down. UK construction firms were complaining that NATO bombing was targeting infrastructure for which US companies had reconstruction capabilities but not the kind of bridges and buildings the UK companies particularly specialized in rebuilding.

    1. Nick Corbishley Post author

      Thanks Presley. The pleasure has been all mine, especially when I get to read so many interesting and illuminating comments such as the ones on this thread. It is a wonderful quid pro quo.

  8. alfred venison

    once zelensky realised reality didn’t back ukraine unconditionally they parted company. i think the breach is irrevocable. -a.v.

  9. Dallas Galvin

    A significant historical aspect of this move to UKR’s putative cashless society is that it may presage a move into a new feudalism. There have long been other indicators of a neo-feudalism in the works . . . Michael Hudson and the NC Commentariat could provide Econ-history’s more eloquent chapter and verse on the precedents. However, crudely put, the move out of Medieval feudalism and into “modern” times came out of the need for vast cash to pay for wars. We certainly have the wars, but paying for them in ways normal citizens understand seems less of an issue. A keen eye for the head fakes this time seems more than called for!

  10. Savita

    Another perspective.
    Attempting a cashless society in Ukraine will have a consequence unexpected at first glance

    Rather, it would be the defining death knell for the cashless movement worldwide.
    And the end of countless political careers

  11. MFB

    The similarity between Ukraine and Iraq, as a convenient place for deranged psychopaths to impose their demented ideas in order to accomplish catastrophe, seems more striking by the day.

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