Bitcoin payments to be banned in Turkey after confidence drops in lira3 min read . Updated: 16 Apr 2021, 09:00 PM IST
- Turkish lira has plummeted this year, leading locals to keep savings in dollars, euros and bitcoin
Turkey will ban the use of cryptocurrencies as a form of payment following months of economic turbulence that spurred locals to swap the local currency for bitcoin and foreign currencies.
Turkey’s central bank said Friday that cryptocurrencies are excessively volatile and can be used for illegal activities. The bank also said crypto assets are “neither subject to any regulation and supervision mechanisms nor a central regulatory authority."
The move against bitcoin use comes amid a global rally in cryptocurrencies. Bitcoin, ether and dogecoin hit record highs this week. The U.S. listing of crypto exchange operator Coinbase Global Inc. drew increased appetite among individual investors around the world to buy and sell cryptocurrencies.
Cryptocurrencies such as bitcoin, which are independent of central banks and created by so-called computer miners, are seen as a threat to government issued currencies. China keeps a tight leash on bitcoin trading. Nigerian officials said recently that the increasing use of bitcoin could erode the value of the local currency, the naira. Locals there have struggled to gain access to foreign currencies, turning to the black market or bitcoin, according to traders.
In Turkey, use of cryptocurrencies has added appeal after the lira fell sharply in recent weeks. President Recep Tayyip Erdogan abruptly fired the country’s central bank governor in March.
Bitcoin prices have more than doubled this year in dollar terms. The rise has been even greater in lira terms. On Friday, one bitcoin bought nearly half a million lira, according to CoinDesk, from 215,000 at the start of the year. Google searches for “cryptocurrency" in Turkey have shot higher in recent weeks.
Turks have also piled money into gold, dollars and euros as the country’s economy struggled. Mr. Erdogan has urged the public to invest gold and savings of foreign currency back into the Turkish economy.
“There is an element of keeping tight control on the payment ecosystem, especially in an environment where Erdogan is very keen for Turks to bring their money and gold out," said Wolfango Piccoli, co-president of Teneo, a risk-analysis firm in London.
Turkey had about 2.4 million users of cryptocurrencies in 2020, with the most popular being bitcoin, according to a report by Turkey’s Information and Communication Technologies Authority.
Turkey has long maintained tight controls on methods of online payment, banning PayPal Holdings Inc. in 2016.
Ozgur Guneri, the chief executive of cryptocurrency exchange BtcTurk, said the new regulations would have a limited impact on his business because most cryptocurrency users in Turkey used the assets to store value, rather than make payments.
“From the user’s perspective they can continue to buy, sell or hold cryptocurrencies through cryptocurrency platforms," he said. “I don’t see it as a long-term problem."
The new regulation bans the flow of money from payment companies to cryptocurrency exchanges, meaning that users will still be able to exchange cryptocurrency through banks, a move that grants the government more visibility into the use of crypto assets. It will also limit the use of cryptocurrency in everyday life, experts say.
“The government doesn’t want money outflow outside of Turkey. They’re trying to define what a cryptocurrency is right now. They do not want to actually treat it as a currency," said Turan Sert, an Istanbul-based researcher on decentralized finance and blockchain.
Because bitcoin can be exchanged between two people without the involvement of a central bank, it is nearly impossible for the government to police transactions, said Chris Bendiksen, head of research at London-based asset-management firm CoinShares.
The most the government would be able to do is track transactions when people go to swap cryptocurrencies for lira at exchanges. The policy will likely drive those trades underground, limiting the government’s visibility, he added.
“It’s like banning file sharing or banning certain words. It’s just not possible. You can say it—it doesn’t do anything," he said. “This is going to be an expensive exercise of trying to enforce something this is unenforceable."
The new rule comes after the surprise change of leadership at Turkey’s central bank. Former governor Naci Agbal said late last year that the bank was developing its own cryptocurrency, which was set for a test run in 2021.
Mr. Agbal was replaced in March after running afoul of Mr. Erdogan by raising interest rates in an effort to control inflation. The president has repeatedly expressed a desire for low interest rates as part of an unorthodox strategy designed to encourage economic growth.
The Turkish decision, first announced overnight in the government’s official gazette, goes into effect on April 30.
This story has been published from a wire agency feed without modifications to the text.
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