US Treasure instead of dollar: business has found a new way to withdraw currency from Ukraine
19 December 2024 12:19
Ukrainian companies have learned how to circumvent the NBU’s currency restrictions by trading in U.S. government bonds. This is stated in an investigation by Ekonomichna Pravda, according to "Komersant Ukrainian".
According to the publication, after the introduction of strict currency restrictions at the beginning of the full-scale war, businesses began to look for legal ways to withdraw capital abroad. One such way was to buy US government bonds (treasuries).
According to journalists, the scheme works through the three largest investment companies – Dominant Trade, University Capital, and ICU. Clients buy American bonds for hryvnia, then transfer them to accounts in foreign depositories, and after redemption receive foreign currency outside Ukraine.
According to market participants, the choice of US bonds for such transactions is not accidental. This is the most liquid asset on the international stock market, and attempts to limit its circulation may cause a negative reaction from Ukraine’s American partners.
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Not a cheap pleasure, but worth the money
Using such a capital outflow scheme is not a cheap pleasure. The cost of the transaction can reach 5-10% of the amount due to the need to bring the bonds to the Ukrainian market, obtain a trading permit and pay brokerage fees.
Due to the high cost of the service, it is mainly used by large clients who need to ensure the legal origin of their funds and successful financial monitoring by foreign banks.
Despite the price, the volume of foreign bonds traded in Ukraine has increased significantly. In September 2024, they exceeded the volume of transactions with Ukrainian bonds abroad, reaching UAH 27.6 billion.
The state will try to overcome the scheme
The publication notes that in December 2024, the NBU sent a special letter to banks expressing concern about such transactions. The regulator has recommended strengthening the monitoring of the activities of these investment companies, and they are already feeling the effects of increased attention from the NBU. Banks have started to slow down servicing and require additional documents even for routine securities transactions.
Despite the political risks, by the end of 2024, the NSSMC may prohibit the transfer of foreign securities from accounts in Ukraine abroad. According to the publication, the IMF insists on such a decision, which plans to disburse the next tranche of funding by the end of December.
Stock market participants express serious concern about a possible ban on such transactions. In their opinion, this could be a significant blow to both their business and the development of the Ukrainian stock market in general. The investment companies insist that their actions are legal and state that they cannot refuse clients to transfer bonds abroad, as this could lead to the loss of their licenses.
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