The government of Ukraine has nationalized the country’s largest bank, Privatbank, a bitcoin-friendly bank, to prevent a meltdown caused by alleged insider lending, according to Deutsch Welle. Privatbank has allowed merchants to receive bitcoin payment before converting it into cash.

Ukraine’s government reported that it now fully owns PrivatBank and guarantees uninterrupted functioning of the bank and the safety of client funds.

The bank controls a third of the country’s deposits and has branches in Baltic nations.

Insider Loans Cause Problems

The bank loaned money to outsiders that may never be repaid. Its bonds have dropped by nearly 50% since the reports about the outside loans surfaced in November.

Igor Kolomoyskiy, the former owner, was one of Ukrainian President Petro Poroshenko’s early anti-corruption targets.

Sergiy Fursa, an economist at Dragon Capital, said 80% to 90% of the bank’s loans went to institutions that Kolomoyskiy controls, which Fursa characterized as insider lending – the funds were withdrawn by its owners from the bank.

The current management of PrivatBank will be replaced, according to the Kyiv Post. Oleksandr Shlapak, former finance minister, will be the new president, replacing Oleksandr Dubilet.

A team of Deposit Guarantee Fund and NBU officials traveled to PrivatBank’s headquarters in Dnipro on Dec. 18 to assume control.

The bank’s owners offered to sell the bank to the state themselves, National Bank of Ukraine (NBU) Governor Valeriya Gontareva claimed at a Dec. 19 press conference.

Banking System At Stake

Oleksandr Savchenko, who oversees Kyiv’s International Institute of Business, said the nation’s banking system will not survive should PrivatBank close, according to the Kyiv Post. Other banks would not have their loans returned, bankruptcies would commence, and panic would ensue, Savchenko said.

PrivatBank blamed its nationalization on media attacks by Kolomoyskiy’s political opponents.

The bank’s IT director said on his personal Facebook page that the decision to voluntarily allow the government to take ownership of the bank occurred when the bank recognized the media attacks, which the bank could survive, could endanger its clients.

Oleg Gorokhovskiy, the bank’s deputy CEO, said the safety of Ukrainians’ money was the most important thing. He said the bank will continue to function as it did previously. Kolomoyskiy did not comment.

Also read: Ukraine’s largest bank helps integrate bitcoin as a payment

A Bitcoin-Friendly Bank

The bank allowed customers of online retailers to pay in bitcoin while merchants received payment in Hryvnias (Ukraine’s national currency) or Euros.

Buyers could choose bitcoin as the payment method when arriving at the checkout page.

The bitcoin purchase could be initiated by scanning a QR code. PrivatBank based the exchange rate in Hryvnias or Euros – depending on the specified currency – before converting the cryptocurrency to fiat money.