Turkey in the grip of the cryptocurrency frenzy

Turkey witnessed an unusual draw in the recent Istanbul football derby between Besiktas and Fenerbahce. To decide which team starts on which side, referee Arda Kardesler apparently tossed a coin bearing the cryptocurrency bitcoin logo, surprising millions of people. The Turkish Football Federation (TFF) has opened an investigation. The incident was just one illustration of the growing frenzy around a new investment opportunity. The country ranks among the top users of cryptocurrencies. Turkish TV channels and billboards are full of ads from crypto platforms urging Turks to open accounts and trade – and promising clients to get rich quick.

Fusion of the lira

In an environment where the national currency is losing value almost daily, some Turks have turned to cryptocurrency assets as they seek to protect their savings against devaluation. The Turkish lira has lost half its value in the past 12 months, while annual inflation hit a 20-year high of almost 70% in April. “The volume of trade [in the cryptocurrency market] is high in Turkey, the demand is high. because we seek to protect our money from high inflation and high interest rates,” said Vedat Guven, a consultant who co-authored the book “Blockchain, Cryptocurrencies, Bitcoin – Satoshi is Changing the World.” DW.

Previous generations of Turks tried to dodge inflation by investing in more stable assets like gold and real estate. Now the current generation has a popular alternative. “There are 5.5-6 million Turks who hold a cryptocurrency account in the country and if you include family members, that’s something about 10-12 million people are interested in,” said Guven said. “Unfortunately, the ‘get rich quick’ mentality here without learning or effort is higher than in the rest of the world.”

While the state has tried to halt the fall of the pound by taking a new decision almost every day to restrict access to foreign currency resources, it has so far failed to reverse the trend. “Trust in the Turkish lira could not be established despite all efforts,” said Burcak Unsal, a lawyer at Istanbul-based law firm Unsal, which specializes in cryptocurrency and blockchain transactions. “Real estate and foreign currency investments, etc., are expensive and unreliable; there are taxes and commissions to be paid.” In contrast, students and retirees can invest in crypto with very modest amounts – even if they don’t have a credit card, they can still invest in cryptocurrencies,” he added.

Too little, too late?

There are, however, concerns over the market segment after the founder of cryptocurrency platform Thodex shut down his site and reportedly fled the country with up to $2 billion (€1.9 billion). ) of investor assets last year. New legislation is overdue after the Central Bank of Turkey (CBRT) decided to ban the use of cryptocurrencies in payments for goods and services last year. The question of how to tax cryptocurrency transactions also remains to be resolved. “There is not enough legislation on this issue in Turkey so far, it is a problem”, Unsal said. “Turkey is definitely too late – a healthy and reliable sector must be created without further delay, based on precise and comprehensive legislation,” he said.

The sudden ban on the use of crypto-assets for payments by the CBRT has raised questions about what exactly Turkish authorities are doing with cryptocurrencies. “If you ban payments with cryptocurrency, you ban blockchain projects and that’s very wrong. We embarrass ourselves,” said cryptocurrency expert Guven. The blockchain is the digital public ledger where bitcoin transactions are processed and recorded. Invented to house bitcoin, the technology now forms the basis of many other cryptocurrencies.

Cryptocurrency exchanges are on the rise

According to data from CoinGecko, the daily trading volume of Turkey’s leading cryptocurrency platform, BtcTurk, reached around $424.3 million, while another local Turkish platform, Paribu, had a transaction volume of $203.5 million. Some 40 cryptocurrency exchanges operate in Turkey. “Exchanges are growing like mushrooms, among them foreign exchanges entering the Turkish market,” Unsal said. “The volume they’re creating, the direct investment they’re bringing in, and their craftsmanship is truly amazing,” he noted. In another sign of unpredictable volatility, cryptocurrencies plunged last week. Bitcoin, the largest cryptocurrency by total market value, fell to its lowest level in 16 months on May 12.

Sharon P. Juarez