East Ukraine is 'de facto offshore zone' after banking system shuts: Rebel leader

Pavel Gubarev, one of the leaders of the self-proclaimed Donetsk People's Republic, watches as fighters pledge an an oath during ceremony in the city of Donetsk on June 21, 2014. Pavel Gubarev said east Ukraine was a "de facto offshore zone
Pavel Gubarev, one of the leaders of the self-proclaimed Donetsk People's Republic, watches as fighters pledge an an oath during ceremony in the city of Donetsk on June 21, 2014. Pavel Gubarev said east Ukraine was a "de facto offshore zone" following a decree from the country's government that shuts down the banking system in the area. -- PHOTO: REUTERS

DONETSK, Ukraine (AFP) - A rebel leader on Sunday said east Ukraine was a "de facto offshore zone" following a decree from the country's government that shuts down the banking system in the area.

"They've taken their banking system out of here. They've switched it off," Mr Pavel Gubarev, head of the mobilisation committee of the unrecognised Donetsk People's Republic, told reporters.

"They are de facto acknowledging our independence," he said, adding: "This is basically now an offshore, tax-free zone where banks will work only with cash."

Mr Gubarev said that bank branches on rebel-controlled territory would initially be put under "external administration" with a view to possible nationalisation.

He said Ukraine's national currency, the hryvnia, would be kept for now but there was discussion on adopting the Russian ruble or founding a new currency.

Ukraine's central bank last week introduced an "emergency regime" for banks in the rebel-held Donetsk and Lugansk regions and the Russian-controlled Crimea.

It gives the central bank the right to ban some operations and to destroy cash if it cannot be evacuated from the area, as well as installing a remote payments system.

Mr Gubarev, a former advertising executive, has been a leading figure in the pro-Russia separatist movement.

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