Recently, the cryptocurrency has become in great demand in Turkey. This happened against the background of rising inflation in the country and the rapid fall of the Turkish lira. Already in March 2021, inflation reached 16%. At the same time, according to the company Chainalysis, the turnover of cryptocurrencies reached 218 billion liras or 27 billion dollars. In the previous year, the volume was significantly lower (only 7 billion Turkish liras). In connection with this situation, the Central Bank, as a regulator, has changed its policy towards crypto assets. On April 16, 2021, it was decided to ban the use of cryptocurrencies as payment for goods and services on the territory of the Republic of Turkey. The ban on cryptocurrency came into force on April 30.
What caused the ban on cryptocurrency in Turkey
I think that the country can adopt laws prohibiting cryptocurrency, primarily for economic reasons:
- transfers of digital currency, which is not a national currency, lead to a decrease in economic indicators, to a drop in GDP;
- this is an easy way to illegally launder money or get it out of the country;
- payment systems, banks are not interested in using coins, since the decentralization of cryptocurrency operations leads to the destabilization of the economy.
I think it was these reasons and other risks that led Turkey to adopt such a law. Why was cryptocurrency banned in Turkey? Completely or partially? What really happened? The situation looks like this: the state does not have enough funds to pay for the state debt, the reserve fund is empty. Inflation is rising, leading the Turks to distrust the lira. They invest in real estate, proven currencies-euro, dollar, gold. Taking into account that they are gambling people who want to get rich quickly, then many were fond of risky crypto assets.
By investing money in virtual coins, Turkish citizens not only took capital out of the control of the state, but also contributed to its withdrawal abroad. And the country cannot afford this. That is why, according to the head of the Central Bank, measures were taken to resolve the situation. According to him, it is not about a complete ban on cryptocurrencies in the country. But as digital assets are increasingly implicated in suspicious transactions, it was decided that the cryptocurrency in Turkey cannot be used to pay for goods and services. Already on April 29, the largest Turkish exchanges Papara, Finance, and Ininal stopped working on transactions between the lira and cryptocurrency. The turnover of assets, both between direct counterparties and between intermediaries, has been suppressed.
What the new rules mean
The Central Bank of Turkey, as a regulator, is looking for ways to create a legal framework for the cryptocurrency market. It is no secret that the country ranks first in the Middle East in popularity of cryptocurrencies among the population. The introduction of a ban on payment in coins led to a fall in the exchange rate of assets. According to the new rules, it is prohibited:
- to provide services, conduct settlement transactions with cryptocurrency for licensed, registered platforms, payment systems and services;
- to create new models and forms for buying, transferring, and selling fiat funds between wallets.
These measures, in my opinion, will hit the local stock exchanges hard. But it is hoped that the government will create a balanced system for storing and calculating digital money. The authorities understand that it is unwise to introduce a moratorium, since many citizens use cryptocurrencies and hope that it will be possible to resolve the situation by transferring transactions to the legal field. Cryptocurrency will remain popular in the world, so the Central Bank hopes to balance the cryptocurrency industry in Turkey and put it on a legal track. I think that the authorities will leave ways for the receipt of cryptocurrencies on local financial platforms, their withdrawal in lira, and allow the further purchase of real estate for digital capital.