The Central Bank of the Republic of Turkey (CBRT) banned the use of crypto assets as a payment method for transactions in April 2021. However, there was no explicit clause that prohibited crypto trading. Instead, the regulation prohibits direct and indirect use of assets in P2P transactions, payment services, and electronic currency exports. In spite of the ban, citizens' interest in cryptocurrency is growing - and even businesses are turning towards crypto as the value of the lira declines. With over 30 cryptocurrency exchanges in the country, Turkey is laying the legal groundwork for cryptocurrency and the future of trading.
The government's stance on cryptocurrency
The first attempt by Turkish law to govern cryptocurrencies was through the Regulation on Prohibiting Payments with Crypto-Assets on April 16th, 2021. The Central Bank of the Republic of Turkey (CBRT) made the use of crypto assets as a payment option illegal in transactions; however - they never outlawed trading crypto assets.
The Turkish Financial Crimes Investigation Board (MASAK) also published a guide for crypto asset service providers, which aims to ban money laundering and the financing of terrorism through crypto asset transactions. MASAK has five main obligations: reporting suspicious transactions, providing information, retention, and submission of documents - and customer identification.
What does the regulation prohibit?
The law prohibits the use of crypto assets, directly or indirectly - for payments and services. This include payment and electronic money institutions of intermediary services to platforms that offer the trade, deposit, transfer, or issuing of services relating to crypto assets - and fund transfers from these platforms. Finally, it prohibits the development of business models that enable the use of crypto assets in the provision of payment services and electronic money issuance.
Turkey plans to issue its CBDC amidst inflation
Turkey’s inflation rate rose to nearly 70% last May, and its citizens are growing increasingly upset over staggering electricity prices. The government responded by using state banks to purchase Liras in an attempt to cut losses. President Erdogan plans to meet with cash-rich Gulf states to request financial support for Turkey. He even visited Saudi Arabia to rekindle relations, in spite of the 2018 killing of Riyadh journalist Jamal Khashoggi while inside Turkey's consulate in Istanbul.
The local news agency Sabah stated that the Central Bank of Turkey and financial department of the President are hard at work resolving the depreciation of their currency. Both entities are attempting to cater to the increasing adoption of Bitcoin among Turkish citizens. The surge in digital assets has piqued the government's interest, and accommodating this shift to a digital economy might prove the answer to their currency problems.
“Restrictions on cryptocurrencies are a thing of the past, and today it is clear that many countries are developing CBDCs using the same technology.”
Ayben Koy, Associate Professor at the Istanbul University of Commerce
Cryptocurrency is extremely popular despite its ban
Over 30 cryptocurrency exchanges are based in Turkey, and the number is only set to increase. Two of Turkey's top exchanges, Bitturk and Paribu - reported a steady volume clearing an average of $1 billion in transactions daily. This comes as a surprise, all things considered.
The fact of the matter is, there are still a plethora of crypto exchanges in Turkey available. For example, Capital functions as much more than a exchange - allowing for the trading of stocks, forex, market indices, commodities, ETFs, and more with zero trading fees. The platform charges a competitive spread ranging from 0.1 -0.3%, and is licensed by the Australian Securities and Investments Commission (ASIC) and the Financial Conduct Authority (FCA) in the UK. Citizens are also relying on Binance - the world's largest trading platform by volume. By the looks of it, cryptocurrency is here to stay and grows stronger each day.
Turkey's ban on the use of crypto assets as a payment method has been in effect for over a year. Nonetheless, there was no mention that prohibited the trade of crypto assets - and its citizens' interest in crypto is rapidly growing. With the rise of inflation in Turkey, the Central Bank of Turkey is working towards a digital equivalent of the Lira to combat the currency collapse, and hopes to release it within 2 years. Hopefully, regulations will ease up to allow for less restrictive transactions.
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