THE TRANSFORMATION OF UKRAINE'S CURRENCY SYSTEM: FROM CRISIS MANAGEMENT TO DIGITAL EUROPEAN INTEGRATION

Abstract

This study examines the structural transformation of the foreign exchange system, specifically its most important component—the foreign exchange market of Ukraine. The current stage of development of the country's financial sector is characterized by an unprecedented shift from a liberal paradigm of free capital movement to strict administrative control, driven by the challenges of a full-scale invasion and the imposition of martial law. Until 2021, the market operated on the basis of gradual liberalization in accordance with relevant legislation; however, the events of 2022 forced the National Bank of Ukraine (NBU) to introduce an emergency management regime, which included fixing the exchange rate and imposing critical restrictions on cross-border transactions. Currently, monetary policy focuses on restoring market mechanisms through a managed exchange rate regime and the digital modernization of financial infrastructure with the aim of full integration into the European economic area. Purpose. To conduct a comprehensive analysis of the institutional and technological transformation of Ukraine's foreign exchange system during the 2021–2025 period. To assess the effectiveness of the NBU's anti-crisis measures, identify new operational risks in the banking sector, and justify the implementation of innovative digital tools in accordance with European Union standards. Methods. The study is based on a detailed analysis of Ukraine's regulatory framework, specifically NBU resolutions regarding the operation of the banking system under martial law, and strategic documents from international financial institutions. A systematic approach was used to study architectural models for the issuance of central bank digital currencies (CBDCs) and to conduct a comparative analysis of regulatory regimes across different years. The assessment of the foreign exchange market's stability was based on statistical data regarding foreign exchange interventions, the banking system's liquidity, and the monitoring of schemes to circumvent foreign exchange controls. Results. It was established that the structural transformation of the currency system ensured macrofinancial stability during critical periods. The transition to a managed floating exchange rate in October 2023 was a key stage in the market's adaptation, allowing for the balancing of supply and demand without a critical depletion of gold and foreign exchange reserves. Significant structural challenges were identified, including a high share of non-performing loans and the need to migrate banking services to cloud storage to ensure data security. The necessity of implementing the ISO 20022 standard and SupTech technologies for supervisory automation was substantiated. Special attention is given to the concept of the e-hryvnia as a tool for transparent social payments and cross-border settlements. It is demonstrated that the adaptation of the European MiCA regulation is a necessary condition for the legalization of the virtual assets market and its integration into Ukraine's traditional monetary system. Conclusions. The continued stability of the monetary system depends on the successful alignment of national financial legislation with the requirements of the Single Euro Payments Area (SEPA). Priority areas include completing the digitization of currency supervision using Big Data tools to monitor suspicious transactions and developing infrastructure for smart contracts based on the national digital currency. Implementing these steps will ensure the transparency of the foreign exchange market, increase Ukraine's investment attractiveness, and contribute to rapid post-war economic recovery through integration into the global digital financial space.