It’s been a good few months for Bitcoin, with the world’s largest cryptocurrency hitting its ATH on the charts less than 48 hours ago. And yet, despite such bullishness, BTC at press time found itself a victim of corrections after a dramatic decision by Turkey’s Central Bank.
According to Resmi Gazette, the country’s official journal, the Central Bank of the Republic of Turkey has now imposed a ban on crypto-holders using their digital assets for payments, in addition to preventing payment providers from adding funds to their digital wallets at crypto-exchanges. In what is hugely significant legislation, the Central Bank of Turkey (CBRT) said that cryptocurrencies and other such digital assets based on distributed ledger technology cannot be used, directly or indirectly, as instruments of payment w.e.f 30 April.
“Payment service providers will not be able to develop business models in a way that crypto assets are used directly or indirectly in the provision of payment services and electronic money issuance, and will not be able to provide any services related to such business models.”
Here, it’s important to note that while banks are excluded from the regulations, which means that users can still deposit Turkish lira on crypto-exchanges using wire transfers from their bank accounts, payment providers will be unable to provide deposit or withdrawal services for crypto-exchanges.
Payment providers and digital wallets have been widely used in Turkey to transfer fiat funds to crypto-exchanges and vice versa. A weaker Turkish lira and inflation pressure also had driven up demand for the cryptocurrency. Just recently, Binance partnered with local payment provider Papara after it first entered the Turkish market to provide a lira onramp for several different cryptocurrencies. Even Ripplenet member KFH launched cross-border payments to Turkey.
What this new regulation means is that users have two weeks to clear their balances if they exclusively use payment providers as fiat-to-crypto-gateways. The CBRT said that the ban was motivated by a lack of “central authority regulations” and “supervision mechanisms” for cryptocurrencies and other similar digital assets. Furthermore, the central bank added,
“Among other risks, cryptocurrencies “may cause non-recoverable losses for the parties to the transactions due to the lack of regulation.”
Historically, the Turkish government has always had a tight grip on the payment ecosystem. In 2016, Turkey banned major global payment provider PayPal. Last month, the Turkish Ministry of Treasury and Finance announced their intentions to monitor the crypto-ecosystem and work with the Central Bank, Banking Regulation and Supervision Agency, and Capital Markets Board to regulate crypto.
Turkey’s crypto and blockchain ecosystem welcomed 2020 with big ambitions and a strong track record from 2019, which was its best year ever in terms of adoption. BtcTurk, a leading local crypto-exchange, announced in August that over 1 million users were trading on the platform.
It was the volatile activity of the Turkish lira that attracted the attention of global markets in 2020 and fueled the asset class’s popularity in the country. In fact, according to the ‘Cryptocurrency Research Report,’ the number of crypto-owners in Turkey is over 2.4 million, or around 3% of the population.