Ukrainian Government To Use the Blockchain Auction For Selling Its Assets

News and Analysis

The news was announced during the online conference with Alexander Danilyuk, Minister of Finance of Ukraine, at “Blockchain Incredible Party” (aka BIP001) event that took place in Odessa.

Alexander Danilyuk, Minister of Finance of Ukraine

Alexander Danilyuk, Minister of Finance of Ukraine

During the video session, the Minister presented his vision as the government official that Ukraine might become the leading country in applying the blockchain solutions for public service management to improve its efficiency and transparency.

Danilyuk also announced the Ministry’s plans to use the blockchain-based “Auction 3.0” for selling government property.

“We would like Ukraine to be the first country in the world that use the blockchain in selling state assets: to sell them transparently at the highest price and to make sure that there’s no place for corruption. And I believe that the blockchain offers such opportunities. That’s why I’m actively supporting the project Auction 3.0, which is done in partnership with Georgian Innovations and Development Foundation”, the Minister explained.

The looming debate on a desirable share of public enterprises (owned by the whole population and managed by the state bureaucracy) in the economy continues over the past years in Ukrainian society. While the proponents of total privatization reasonably point at poor efficiency and corruption within the state management machine, the existing auction mechanisms cannot provide the needed level of security and transparency of the very process.

The Ministry of Finance is responsible for much of public property in Ukraine so its support and decision to pilot the project on the highest level could prove its utility. With enthusiasm, Danilyuk explained the audience the immediate course of actions:

“We have a specific problem in DGF (Deposit Guarantee Fund), which has a lot of assets. And there are a lot of suspicions that these assets could be sold in non-transparent manner. What is the answer? I believe in a new mechanism – this Auction 3.0, that would allow to do it in a quick and transparent way.”

Danilyuk also described the following plans, after the decentralized auction will be successfully (as he’s certain) implemented in Ukrainian deposit guarantee fund. According to his words, the next steps will be to invite the National Bank to join the program and to try some other potential applications, such as state securities selling.

“This is our opportunity to change the approach to privatization, the overall approach to selling the state assets, and this is our chance to change the country”, he concluded.

During a short Q&A the minister also touched the issue of capital controls in Ukraine:

“We do have capital control. This is a serious impediment to the investments coming to the country. Unfortunately, such things are much easier to introduce than to remove. The plans to remove capital controls is the very specific question. What prevents us from doing this is the agreement with IMF, that in order to make sure that currency reserves are growing we need to impose such restrictions temporarily. We also agreed that after the next review, that will happen pretty much imminently, we will be able to lift these restrictions. And that is a very positive signal to investors so that impediment will be removed as many others as well.”

Lasha Antadze from Innovations and Development Foundation commented on Ministry’s plans regarding the use of Auction 3.0 platform by the Ukrainian government:

“We have to start from somewhere and I think that this project being supported on this high level and scale will show a huge success and will be a kind of an open gate for all the things that you [blockchain business] do around the world”, he said.

As Forklog reported earlier, the blockchain-based system for holding online auctions for leasing and selling of state-owned property was created and tested by Ukrainian blockchain development team Distributed Lab in partnership with Innovations and Development Foundation. The main idea behind the project is to provide an instrument to reform the government property privatization in Ukraine in order to improve its transparency. By the way, the last ticket for BIP001 conference has been successfully sold via the platform in a transparent and decentralized way.

by Eugene Muratov

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