The President of Ukraine signed the Law «On Payment Services» № 1591-IX, which allows the National Bank of Ukraine (NBU) to issue a National Bank Digital Currency.
The Law № 1591-IX was adopted by the Parliament on 30 June 2021. This law was entered into force on 01 August 2021 and shall come into effect on 01 August 2022, with the exception of certain articles.
Currently, the general principles of functioning of payment systems and settlement systems in Ukraine, the concept and general procedure for carrying out money transfer within Ukraine, responsibility of subjects of the transfer, general procedure of supervision (oversight) of payment systems are determined by the Law of Ukraine «On Payment Systems and Funds Transfer in Ukraine» № 2346-ІІІ dated 05 April 2001.
The payment legislation need to be updated. Such update would make it possible to adapt Ukrainian legislation to EU legislation and form the legal basis for the integration of the payment system of Ukraine with the EU system.
The Law № 1591-IX has the potential to become such a legal basis, as it is based on modern requirements and takes into account the norms of the EU legislative acts, in particular the Payment Services Directive (PSD2) and the Electronic Money Directive (EMD).
The Law of Ukraine “On Payment Services” № 1591-ІХ determines the concept and general procedure for payment transactions in Ukraine; establishes an exhaustive list of payment services and the procedure for their provision, categories of payment service providers and conditions of authorisation of their activities; determines the general principles of functioning of payment systems in Ukraine, general principles of issuance and usage of electronic money and digital money of the National Bank of Ukraine; establishes the rights, duties and liabilities of payment market participants in Ukraine; determines the general procedure of supervision of the payment service providers activities, limited payment service providers, procedure of oversight of payment infrastructure.
There are some updates regarding the Law № 1591-IX, for example:
- nine categories of payment services providers (including such providers as electronic money institutions, branches of foreign payment institutions, payment institutions);
- nine payment services, two of which are non-financial (payment initiation service and account information service);
- non-bank payment service providers will be able to open payment accounts and some of them will be able to issue electronic money;
- the NBU will create a regulatory platform for testing services, technologies and tools in the payment market based on innovative technologies;
- open banking in Ukraine.
Such changes will provide an opportunity:
- to expand the range of payment service providers and the list of payment services, which should create conditions for the appearance of new participants in the payment services market;
- to increase the security and efficiency of payment services;
- to unite different payment service providers and technology platforms into a single payment system.
Such innovations are aimed at modernization and further development of the payment services. They have the potential to promote healthy competition, which give an opportunities for growth of the new participants in the payment services market.
The significant advantage of the new regulation of the payment market will be the ability of fintech companies to operate in more favorable conditions for business development. At the same time, banks will also get a new opportunities. They will be able to develop services faster in conditions of healthy competition with non-banking companies.
If in addition to guaranteeing the security of their funds bank customers also receive a convenient and modern technological payment service, non-bank financial companies will need to offer a high level of payment services to attract clients.
So, the provisions of the Law of Ukraine “On Payment Services” № 1591-ІХ are aimed at the development of the payment services sector and the implementation of innovative technologies, which should create conditions for the appearance of new participants in the payment services market.
Authors: Partner SLS Group Oleg Parakuda and junior associate Oleksii Ozvynchuk