Government Cryptos and Smartphone IDs: How Ukraine Engineered the New Digital State to Survive

Ukraine's Diia system is creating a "digital decade." Artwork created by Joanna Andreasson for Paradox.

Ukraine may be repelling a ground invasion reminiscent of Otto Von Bismarck’s old Europe — but Volodymyr Zelenskyy’s government is rapidly embracing emerging technology to streamline military and administrative operations.    

In July, Ukraine’s Ministry of Digital Transformation announced plans to build on the more than 70 European mobile operators offering free roaming services to Ukrainian refugees, the latest in a series of technology investments which include a digital identity system and Central Bank Digital Currency (CBDC). 

“Everything is so seamless,” Marina Myshyna, who travels routinely between Lviv and New York, tells Paradox. “We have these stories of Ukrainian refugees coming to Western Europe and educating them on how things should be done. Ukrainian refugees were shocked to discover first world countries like Germany are so backwards compared to Ukraine in terms of how nothing is digitized there.” 


While Ukraine’s Ministry of Digital Transformation initially served to reduce wait-times and bureaucratic nightmares, Russia’s invasion has accelerated the adoption of digitized administrative services, most notably the Diia identity system.   

Launched in 2021 to have “state-legitimate” digital ID cards, Diia serves as an online portal merging sensitive records with pertinent organizations, such as Ukraine’s most popular e-banking platform “monobank” or their privately run mail-system “Nova Poshta.” Many state-person exchanges are replaced with the app — Interactions similar to DMV visits can be conducted entirely online. Diia has created a basic e-notary, implemented the automatic dispersal of education materials, and established a variety of “electronic trust services” to harmonize the Ukrainian ID system with the European Union. 

Displaced Ukrainian refugees can access and use passports, licenses, certificates, and other forms of identification through their smartphones. 

 “I personally like Diia very much,” Iryna Kravchuk, a linguist in the Ukrainian Armed Forces, tells Paradox. “ I don’t have to take all my hard documents with me when I leave home.” 

Kravchuk has served as Deputy Company Commander in Odessa since February 2020, where she prepares translations between English, Ukrainian and Russian. Kravchuk also trains soldiers in cultural awareness and foreign language acclimation. Prior to this, she worked as a translator for the Public Broadcasting Company of Ukraine and as an interpreter during the parliamentary elections of 2014 and 2015.

“A problem that I encounter is that our older people from the villages may not even have a phone, so they don’t know how to use mobile apps,” adds the linguist. “In that case, they must have all their documents with them. All the state institutions work with them though, and kids don’t seem to have issues using Diia. It’s not hard to use, my grandmother started to use it sooner than I did.”

After Russia’s invasion, Diia integrated air-raid alerts and notifications, and mobile donations to the Ukrainian Army. The app also offers services to businesses and those operating in the private sector. 

“I trust Diia. It has constant updates and other services, so I began to send personal reporting through the app. I’ve heard that they want to implement some sort of service for military registration,” Virovets Denis, a community manager at Ethereum Ukraine, tells Paradox. 

“Earlier in April, a friend of mine, who was considered a ‘temporary displaced’ staying in L’viv, a relatively safe city, had to go to court to confirm his mother’s occupied Luhansk where there’s no real laws of government or any other traces of civilization,” adds Myshyna. “About a month after he submitted the required evidence and testimonies to a Ukrainian court through his Diia app, he received the court’s decision via a notification on his phone while having dinner. The court was in Kyiv, his mom died in Luhansk under the occupation, where neither my friend nor his brother could get into, yet the case had been solved by a Ukrainian civil court through the Diia app.”

Crypto and CBDC 

According to blockchain analytics firm Chainalysis, Ukraine has led the world in crypto adoption since 2020. 

Ukraine’s Army is accepting cryptocurrency donations, while Zelenskyy’s government has established the decentralized autonomous organization (DAO) “Aid of Ukraine ” to further funding efforts, which Russian-born Ethereum founder Vitalik Buterin has even supported

While many reserve bank systems recently began to propose their own central bank digital currencies (the Biden administration issued an executive order to prioritize creating a CBDC), the e-Hryvnia has been in development since at least 2018. The early prototype of their CBDC was built and tested on the Stellar Blockchain, where it still exists, and continues to receive support from their CEO Denelle Dixon. The late February declarations of martial law, suspensions of e-money issuance (PayPal & Venmo), and the prohibition of foreign currency pushed many Ukrainians to primarily use cryptocurrencies. By late April, however, the National Bank of Ukraine declared digital currency procurements to be “quasi cash transactions,” and introduced severe restrictions on the purchasing of cryptocurrencies. Such actions have led some to believe that a full-scale adoption of the e-Hryvnia is imminent, but that remains to be seen given the ongoing invasion. 

The most popular digital currencies are stablecoins, such as Tether, and Ukraine’s reserve bank seems willing to do whatever is necessary to preserve the dominance of the Hryvnia and its CBDC. While prohibitions on the conversion of the Hryvnia to Bitcoin may only be temporary, Zelenskyy has not indicated that their reserve bank is interested in allowing other digital currencies to compete with the e-Hryvnia.  One of the primary goals of the e-Hryvnia CBDC is to battle the “shadow economy” that cryptocurrencies like BTC and ETH supposedly support. 

A “Digital Decade”

Since the overthrow of the Russian installed Yanukovych regime, Ukraine has rapidly modernized its administration. In 2019, the European Union declared the impending decade to be a “digital decade,” and extended their EU4Digital initiative to Zelenskyy’s administration.

The president’s new digital paradigm rests upon the Ministry of Digital Transformation and the National Bank of Ukraine. The Ukrainian government has pledged to offer all administrative services in a digital format by 2024. The digital transformation of “biological and landscape diversity” aims to create an accounting and monitoring system for the use of natural resources within key regions. Similarly, the transformation of fisheries is intended to establish an electronic system for analyzing the use of water resources, fisherman, catch quotas, and other facets of the fishing industry.

As Russia continues throwing its ground forces to take Kyiv, Ukraine pioneers digital services and protocols out of survival, reshaping their economy and the notion of the modern digital state.