Ukraine Imposes Capital Controls, Limits Foreign Currency Withdrawals

Tyler Durden's picture


Yesterday we reported that as part of the Ukrainian central bank's plan to bailout the nation's largely insolvent private banks, it would provide any needed funding but only "if they will remain under open control of the National Bank of Ukraine." And since the new CB head Stepan Kubiv's allegiance to Europe were already well-known, this was merely a quick and efficient way of providing Europe with all the banking details including asset holdings of the local population. Today, the annexation of the country's banking system by a "benevolent" Europe is complete.

Itar-Tass reports that Ukraine's national bank has imposed temporary limits to withdraw money from foreign currency deposits to sums equivalent to no more than 15,000 hryvnias (about $1,500) a day, National Bank Chief Stepan Kubiv told a press conference. Or, as the citizens of Cyprus call it - capital controls.

Why is Ukraine doing this? Because when your currency is crashing at a record pace to unseen lows, what is the best way to limit FX transactions? Simple - just minimize the amount of foreign currency that can be in circulation.

Which is also why the the central bank's capital controls do not touch local currency: there is more than enough of that in circulation since after all Ukraine has its own currency and can print it in infinite amounts: "For hryvnia deposits you may take as much as a million or two. Banks have liquidity," Kubiv said.

Then there was the token propaganda:

The chief banker also noted that the situation on Ukraine’s currency market was under control. "The exchange rate may move in one direction and the opposite. There are just emotions and misinformation on the financial market," he noted.


He assured the national bank would toughly stop violators of the currency law. For example, inspectors were sent to eight banks that had engaged in speculation, he said.

To summarize: first banks abdicate their control to a pro-European central bank, and now the citizens face their first (of many) capital controls which incidentally will simply aggravate the fund outflow situation even more, leading to an even faster drop in foreign reserves.

Finally comes the inflation. Wait until the people start rioting - think Egypt - when the economy collapses and a loaf of bread costs its wheelbarrow equight equivalent in Hryvnias. Just how fast will the countercoup in Ukraine take place then? Recall, in Egypt it was just over a year and a half...

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Fri, 02/28/2014 - 13:17 | 4489697 pods
pods's picture

Crash the hryvnia then bring in the Euro.

The EU has got them by the shorthairs now.  


Fri, 02/28/2014 - 13:23 | 4489733 CrashisOptimistic
CrashisOptimistic's picture

This is the case for bitcoin, and it is a compelling one.  It is the one thing that can get through the airport, and the only thing.

Fri, 02/28/2014 - 13:35 | 4489799 swmnguy
swmnguy's picture

Yes, that's the case for anything convertible outside the official banking system; toilet paper, coffee, cigarettes, beef jerky, pogs, marijuana, S&H Green Stamps.  The bit about "Getting It Through The Airport" certainly does favor Bitcoin over the others.  But the tangibility, the ability to visualize and understand the chain of control (either you have it and you can touch it right now, or you don't) tends to scare people off Bitcoin.  Maybe the mechanics of Bitcoin itself aren't manipulable (I suppose we could ask Fonestar what he thinks?), but obviously the exchange of Bitcoin can be compromised.  To get my coffee, you'd have to come over and take it.  You can't get it away from me from your keyboard.

Fri, 02/28/2014 - 13:40 | 4489826 maskone909
maskone909's picture

its just a matter of time untill they inact pog confiscation.  i have a shit ton of gold and silver slammers

Fri, 02/28/2014 - 13:48 | 4489861 CrashisOptimistic
CrashisOptimistic's picture

The discussion is about capital controls.  Bitcoin is immune to xray.  Nothing else is. 

There is way too much swaggering about boating accidents and having gold at the bottom of a lake. 

It doesn't do you any good there, especially if you can't or won't ever return to the country where that lake is. 

Make no mistake about this.  A future smash scenario CAN force you to leave.  If you are going to face gold transaction taxes, you WILL convert it to currency and bitcoins and then get the hell out.  You'd be crazy not to.

Fri, 02/28/2014 - 13:35 | 4489801 pods
pods's picture

This I agree with.

Fri, 02/28/2014 - 13:59 | 4489914 maskone909
maskone909's picture

all they would have to do is ban electronics from leaving the country after they set up a firewall.  then make passengers go through magnets to destroy data devices.  although, people with pacemakers and metal implants might be able to smuggle, it will be just as difficult as gold and silver.

Fri, 02/28/2014 - 14:07 | 4489946 CrashisOptimistic
CrashisOptimistic's picture

I don't think you understand how bitcoin works.  The "wallet" stuff could be encrypted, mislabeled and emailed to yourself.  There's nothing to magnetize.

Fri, 02/28/2014 - 13:53 | 4489887 walküre
walküre's picture

So does a stupid S&P portfolio held with an online international brokerage account. BTC is nothing but a hyped up digital stock cert.

Fri, 02/28/2014 - 16:35 | 4490760 Bytor325
Bytor325's picture

"the only thing that can get through an airport".......


Not for long:

Fri, 02/28/2014 - 13:18 | 4489701 jubber
jubber's picture

so sell Gold then the market says

Fri, 02/28/2014 - 13:20 | 4489713 greatbeard
greatbeard's picture

The market always says sell gold. 

Fri, 02/28/2014 - 13:19 | 4489707 skwid vacuous
skwid vacuous's picture

what happened to the other one... NATO only cashing up odd numbered ATMS now?

Fri, 02/28/2014 - 13:21 | 4489722 fooshorter
fooshorter's picture

if you like your attack helicopter, you can keep your attack helicopter!

Fri, 02/28/2014 - 13:22 | 4489724 q99x2
q99x2's picture

Welcome to Goldman Sachs Ukrainian bitchez.

Fri, 02/28/2014 - 13:22 | 4489727 Quinvarius
Quinvarius's picture

They already have a Department of Homeland Security too.  I am not joking.

Fri, 02/28/2014 - 13:29 | 4489773 Whoa Dammit
Whoa Dammit's picture

Have they made everyone enroll in ObamaCare yet?

Fri, 02/28/2014 - 13:22 | 4489729 Fractal Parasite
Fractal Parasite's picture

"Ukraine's national bank has imposed temporary limits to withdraw money"

So the foreign-owned central bank passes laws by decree and parliament is irrelevant.


Fri, 02/28/2014 - 13:25 | 4489743 Seize Mars
Seize Mars's picture

..."So the foreign-owned central bank passes laws by decree and parliament is irrelevant."

America? Oh, you meant Ukraine.


Fri, 02/28/2014 - 13:25 | 4489741 CrashisOptimistic
CrashisOptimistic's picture

In the final analysis, the EU and IMF are going to realize that any money they give to Ukraine has to be sent to GAZPROM for nat gas bills in arrears.

They will scratch their heads and ask "why are we doing this?"

Fri, 02/28/2014 - 13:29 | 4489769 Quinvarius
Quinvarius's picture

Which is why in the end, they will give them nothing--Like every other country the US and the EU have destabilized in the past ten years.

Fri, 02/28/2014 - 13:29 | 4489772 layman_please
layman_please's picture

it's funny money. there's plenty more where that came from.

russians will be the ones scratching their heads if they go along with this

Fri, 02/28/2014 - 13:53 | 4489885 CrashisOptimistic
CrashisOptimistic's picture

You, sir, are correct.  It is when the Russians start saying "your Euro is worth nothing.  Give me aircraft carriers in return for the 6 million bpd we send to Europe" that things get ugly.

The Ukraine has to pay for nat gas with wheat calories.  Period.

Fri, 02/28/2014 - 18:44 | 4491576 layman_please
layman_please's picture

"The Ukraine has to pay for nat gas with wheat calories. Period."
What does it say about the value of money? Currencies are starting to depreciate faster than rotting food.

Fri, 02/28/2014 - 15:45 | 4490447 Debugas
Debugas's picture

to be able to install NATO bases in Ukraine

Fri, 02/28/2014 - 13:25 | 4489744 Quinvarius
Quinvarius's picture

If the banks like your foreign currency, they can keep your foreign currency.

Fri, 02/28/2014 - 13:25 | 4489747 AG BCN
AG BCN's picture

And now the dumb money gets caught, they thought that it was all going to be roses after Yulias speech. 

It escalated rather quickly. 


Fri, 02/28/2014 - 13:26 | 4489748 ebworthen
ebworthen's picture

And they want to join the EU?

Out of the frying pan - into the fire.

Fri, 02/28/2014 - 13:33 | 4489762 skwid vacuous
skwid vacuous's picture

welcome to Polar Vortex of the Rothschild klan, at least they are dressed appropriately

Fri, 02/28/2014 - 13:33 | 4489783 fonzannoon
fonzannoon's picture

any currency folks on here? Euroheading towards 1.40 and the pound heading towards 1.7? or no?

Fri, 02/28/2014 - 13:51 | 4489875 konputa
konputa's picture

It's hard to say, fonz. My opinion is that euro will probably reverse again before it breaks through 1.40.

Fri, 02/28/2014 - 14:01 | 4489926 fonzannoon
fonzannoon's picture

thanks, that is probably correct.

Fri, 02/28/2014 - 14:18 | 4489996 konputa
konputa's picture

I wouldn't be shocked if we saw a 200-300 pip reversal over the next 2 weeks.


Maybe orly or yen cross have some thoughts to share.

Fri, 02/28/2014 - 13:38 | 4489820 itchy166
itchy166's picture

Cant put capital controls on Bitcoin...

Fri, 02/28/2014 - 14:12 | 4489973 moonman
moonman's picture

Nope you can just hack them all away and you do not need to control them

Fri, 02/28/2014 - 16:18 | 4490635 Mike Hunt III
Mike Hunt III's picture

Are you suggesting that a government could hack away all it's citizens bitcoins? How exactly?

Fri, 02/28/2014 - 16:14 | 4490606 viahj
viahj's picture

didn't Russia outlaw BTC?  if so, that's most def a capital control.

Fri, 02/28/2014 - 16:25 | 4490696 Mike Hunt III
Mike Hunt III's picture

But it would be a capital control with no teeth. How does does a government control something over which they have no control? Money in banks on the other hand...

Fri, 02/28/2014 - 21:20 | 4492255 Clowns on Acid
Clowns on Acid's picture

Mt Gox did.....

Fri, 02/28/2014 - 13:39 | 4489823 NoTTD
NoTTD's picture

Capitol controls?


It must be Friday afternoon.

Fri, 02/28/2014 - 13:48 | 4489859 TNTARG
TNTARG's picture

So, the banksters' "revolution" goes on and on.

It remains Venezuela, Argentina and few others, and the Banksters will control the finances of the  whole World.

Isn't that nice the way the US agencies work for the Banksters?

Fri, 02/28/2014 - 13:51 | 4489874 Yttrium Gold Ni...
Yttrium Gold Nitrogen's picture

UAH gained few points today, as interbank market closed at 9.60 - 10.50 UAH/USD, up (or down, depends on the view) from yesterday lows of 10.80 - 11.10 UAH/USD. Lets see how long will it stay that way. I doubt NBU intervened today, as it simply lacks the reserves to do so.

Fri, 02/28/2014 - 13:55 | 4489898 walküre
walküre's picture

Germany's biggest energy company RWE AG lost 3 billion Euros last operating year.

They're shutting NatGas power plants because the demand for energy from traditional power plants is down as more and more alternative renewable energy has come online.

NG seems to be losing some relevance in Europe.

Fri, 02/28/2014 - 14:11 | 4489966 Chuck Knoblauch
Chuck Knoblauch's picture

Like Saudi oil is loing relevance in the US?

Fri, 02/28/2014 - 14:14 | 4489980 CrashisOptimistic
CrashisOptimistic's picture

I suspect you don't understand.  That's not an "energy" company.  It's an electricity company, and electricity doesn't move food to shelves.

They get their oil from Russia, and they get their nat gas from Russia (lesser amounts from norway and netherlands) too.  At most, these renewable electricity things will provide 30% of German electric by 2030.  At most.  Nat gas mostly the rest, and oil essentially ALL of transport.



Fri, 02/28/2014 - 13:56 | 4489899 Who Laughed
Who Laughed's picture

They will be beging for Putins helicopters..

Fri, 02/28/2014 - 14:37 | 4490118 BanksterSlayer
BanksterSlayer's picture

Would I be derided as a fear-monger if I suggested that WE ALL go to our banks today and withdraw cash to get us through next month??

Fri, 02/28/2014 - 16:10 | 4490570 TPTB_r_TBTF
TPTB_r_TBTF's picture

you would be a fear monger if you told me you went diving in the lake near my house.

Fri, 02/28/2014 - 15:26 | 4490369 Itchy and Scratchy
Itchy and Scratchy's picture

Time for BitRubles!

Fri, 02/28/2014 - 15:43 | 4490441 Debugas
Debugas's picture

Ukraine got Cyprus'ed

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