One of the factors fuelling high crypto adoption rates in Turkey is the lack of regulations. The lack of scrutiny has made the country emerge as crypto-friendly. However, this is expected to change in the coming months once regulations are introduced.
Crypto Regulations in Turkey
Turkish citizens rushed to buy Bitcoin and other cryptocurrencies during the 2021 bullish rally. One of the factors that pushed demand for crypto is citizens wanting to shield themselves from inflation.
In 2021, when Turkey’s crypto market peaked, the government started to tighten the noose around this market. New regulations and tax measures were proposed. In March, the Ministry of Treasury and Finance expressed its worry about the increased use of crypto assets and announced plans to bring in local regulators to scrutinize this space.
In April, the Turkish government announced legislation that banned the use of cryptocurrencies to pay for goods and services. The ban was implemented on April 30. When proposing the ban, the Turkish Central Bank stated that the use of cryptocurrencies as a medium of exchange posed huge risks because crypto transactions are not regulated, and their prices are highly volatile.
The ban also cited the fact that cryptocurrencies can be used for illegal activities because they offer anonymity. However, the ban did not state that cryptocurrencies were illegal since exchanges could still proceed with crypto trading.
As soon as the ban was enforced, it affected the operations of crypto exchanges in the country, with two major exchanges shutting down. When Thodex and Vebitcoin were shut down, it contributed to massive losses for investors.
Thodex’ CEO, Faruk Fatih Ozer, was issued an arrest warrant. However, this arrest warrant was not implemented because he fled to Tirana, Albania’s capital, with around $2 billion of investor funds. The collapse of this exchange prompted the Turkish Finance Ministry to propose more regulations for the crypto sector.
President of Turkey to Fight Cryptocurrencies
Before using cryptocurrencies for payment was prohibited, businesses in Turkey were open to transacting in digital assets. With a clear regulatory framework, use cases for crypto in the country would have increased significantly. There could also be much potential that innovative businesses could exploit in this sector.
Besides the proposals introduced in April, it seems like the President of Turkey, Erdogan, is also proposing measures that will protect investors from further losses.
The Turkish President was recently speaking during a Youth Meeting Program where he stated there was a war against cryptocurrencies. The President was speaking on whether the Central Bank was changing its stance against cryptocurrencies.
Erdogan clarified that Turkey did not have any issues with the widespread use of digital assets. However, he stated that the country would not give cryptocurrencies any priority; instead, the country would continue transacting with the country’s fiat currency.
Before the President’s statement, the Central Bank had announced the establishment of the Digital Turkish Lira Collaboration Platform that will look into the developments of a CBDC. This announcement was issued by the Turkish Central Bank on September 15.
