Turkey’s Clampdown On Cryptocurrencies
Turkish government is cracking down on cryptocurrencies while crypto exchanges are collapsing.
Last Saturday, Turkey added cryptocurrency trading platforms to a list of the companies covered by anti-money laundering and terrorism financing regulation. The Official Gazette said that the rules would take immediate effect, and it will cover “crypto asset service providers.” This move comes a month after Turkey’s central bank banned the use of crypto assets for payments on the grounds such transactions were risky.
Trouble In Crypto Exchanges
The country is deploying strict measures against cryptocurrencies and cryptocurrency trading platforms and the collapse of some crypto exchanges played a big role in pushing the government to impose these restrictions.
In late-April, Thodex, one of Turkey’s largest cryptocurrency exchanges, collapsed due to its lack of financial strength to continue operations. The company’s founder Fatih Faruk Özer has fled the country and the government moved to block the company’s accounts while police raided its head office in Istanbul. According to Haberturk newspaper, mentioned by Bloomberg, the losses could be as high as $2 billion, but the founder has disputed the figure. The founder has said around 30,000 users have been impacted by the firm’s collapse.
A couple of days after the collapse of Thodex, Vebitcoin, Turkey’s fourth-biggest exchange, collapsed, citing deteriorating financial conditions. The Demiroren News Agency said, as mentioned by Bloomberg, that the company’s Chief Executive Ilker Bas and three other employees have been detained. The company’s accounts have been blocked by the Financial Crimes Investigation Board and a probe into the firm has been opened.
Post the ban of cryptocurrencies and the collapse of crypto exchanges, the prices of Bitcoin along with other cryptocurrencies plunged.
The Crypto Boom
Believe it or not, Turkish people love cryptocurrencies. But why? Because Turkey’s economy is not doing that great, with inflation touching 16.2% in March, more than three times the central bank’s target. The country’s currency, lira, has weakened over 10% against the dollar this year, making this as the ninth straight year of losses.
So, in order to protect their savings from rising inflation and an unstable currency, Turks are converting them into digital and physical assets such as gold. Turks seeing digital currencies as a safe haven makes sense because the prices of Ethereum and Dogecoin have been increasing sharply due to rising social acceptance.
In The End
The Turkish government is trying to bring measures to regulate the crypto market. After Thodex’s founder fled the country, a senior economic adviser to President Recep Tayyip Erdoğan, told Bloomberg that the government should take action “as soon as possible”. This indicates how the officials are focused on imposing stringent measures on the crypto market.
But has the government done anything to support the economy? Yes. In April, Erdoğan revealed that the government has spent $165 billion in foreign-exchange reserve over the past years to give a boost to the national currency. However, the currency is still dwindling.
The increasing inflation, crumbling currency along with other weak economic factors is what pushing Turkish people towards cryptocurrencies. So, now the question is what will Turks do if they can’t buy cryptocurrencies any more, and what measures will the government take to support Turkey’s economy so that the Turks invest their money in their own country?
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