Turkey bans crypto payments citing risks, hits Bitcoin price
In a move that cooled global bitcoin prices, Turkey’s central bank barred the use of cryptocurrencies and crypto assets to buy products and services, citing potential “irreparable” harm and major transaction risks.
The central bank stated in legislation published in the Official Gazette on Friday that cryptocurrencies and other digital assets based on distributed ledger technology could not be used as a payment instrument, either directly or indirectly.
Turkey’s burgeoning crypto market has gained traction in recent months as investors sought to hedge against the lira’s decline and rising inflation, which exceeded 16% last month.
At 0754 GMT, Bitcoin was down nearly 3% against the dollar, at $61,490, following the Turkish ban, which was criticised by the main opposition group.
Crypto assets, according to the central bank, are “neither subject to any oversight and supervision mechanisms nor a central regulatory authority,” among other security concerns.
“Payment service providers will not be able to create business models in which crypto assets are used directly or indirectly in the provision of payment services and electronic money issuance,” according to the statement, and will not be able to offer any services.
“Their use in payments can result in non-recoverable losses for the parties to the transactions… and may contain elements that undermine trust in current payment methods and instruments,” the central bank added.
This week, Royal Motors, the Turkish distributor of Rolls-Royce and Lotus vehicles, became the first to announce that it would welcome cryptocurrency payments. Apple, Amazon, and Expedia are only a few of the global giants that support such payments.
‘BULLYING’ is a term used to describe the act of harassing others.
Kemal Kilicdaroglu, the main opposition leader, slammed the decision as “midnight intimidation,” referring to President Tayyip Erdogan’s decision to fire the central bank governor last month, which was declared in a midnight decree.
He said on Twitter, “It’s like they have to do stupid things at night.”
Annual inflation in Turkey has reached a six-month peak of 16.19 percent, well above the government’s target of 5%, and unemployment remains high at 13.4 percent.
According to data from US researcher Chainalysis analysed by Reuters, crypto trading volumes in Turkey reached 218 billion lira ($27 billion) from early February to 24 March, up from just over 7 billion lira in the same timeframe a year ago.
According to the numbers, 23 billion lira worth of cryptocurrency was exchanged in the first few days after Erdogan stunned markets by deposing the central bank chief last month, compared to 1 billion lira in the entire month of March 2020.
Turkish authorities requested user details from cryptocurrency trading platforms last week.
“Any authority that begins controlling (the market) with a ban would be disappointed (because this allows fintech companies to move abroad),” tweeted economist Ugur Gurses.
On April 30th, the law will take effect.
8.0800 liras ($1 = 8.0800 liras)