As the Turkish lira slides closer and closer to 10 to the euro, the Turkish central bank last week banned the use of cryptocurrency in transactions, in a desperate attempt to keep people and business from seeking a safe haven.
Between March 20-24, $2.8 billion worth of crypto was traded in Turkey, compared with $12 million during the same period last year. And between the start of February and March 24, trading volumes hit $26 billion, with a spike on the weekend of the removal of Naci Agbal as central bank governor.
In legislation published in the Official Gazette, the central bank said cryptocurrencies and other digital assets based on distributed ledger technology could not be used, directly or indirectly, to pay for goods and services. The bank said transactions carried out through the use of cryptocurrencies presented “irrevocable” risks.
Crypto assets are “neither subject to any regulation and supervision mechanisms nor a central regulatory authority. Their market values can be excessively volatile,” the bank stated.
It also cited their use in ”illegal actions due to their anonymous structures,” and their possible use “illegally without the authorization of their holders.”
The restriction would come into effect on April 30, the bank said.
The decision comes as many in Turkey have turned to cryptocurrencies to shield their savings from rising inflation and the Turkish currency’s slump.
According to data from Google Trends, the number of searches for bitcoin in Turkey reached an all-time high, seeing an upswing of 566 percent in the hours following news of the lira’s fall.
The latest uptick is only part of a much larger story of Turkish interest in crypto, which has been steadily growing for years.
According to Onur Gozupek, a crypto consultant for BtcTurk, Turkey is among the top five countries for adoption rates in the industry.
A 2019 survey by data company Statista claimed that one in five Turks – or 20 per cent of 80 million people – had some form of “crypto exposure”.
Turkish President Tayyip Erdogan has repeatedly called on Turks to convert their foreign exchange and gold holdings through financial institutions as a “win-win” strategy for the country and themselves, after an overhaul of the central bank sent the lira down nearly 12 per cent in a week.
Turks’ holdings of foreign currency touched a record $236 billion in January, reflecting concerns about inflation near 16 per cent – compared with a central bank target of 5 per cent – and distrust in the lira, which has shed half its value in less than three years.