Bitcoin plummeted more than four percent on Friday after the Turkish central bank banned the use of cryptocurrencies and crypto assets for purchases, citing possible “irreparable” damage and transaction risks.
In legislation published in the Gazette, the central bank said that cryptocurrencies and other digital assets based on distributed ledger technology could not be used directly or indirectly to pay for goods and services.
The decision could stall Turkey’s crypto market, which has gained momentum in recent months as investors joined the global rally in Bitcoin to hedge against lira depreciation and inflation that topped 16 percent last month.
Bitcoin fell 4.6 percent to $ 60,333 at 11:17 GMT following the ban, which was criticized by Turkey’s main opposition party. Smaller coins Ethereum and XRP, which tend to move along with Bitcoin, fell between 6 and 12 percent.
In a statement, the central bank said crypto assets were “not subject to any regulation and oversight mechanisms, nor a central regulatory authority,” among other security risks.
“Payment service providers will not be able to develop business models in which crypto assets are used directly or indirectly in the provision of payment services and the issuance of electronic money,” and will not provide services, he said.
“Its use in payments can lead to irreparable losses for the parties to the transactions… and contains elements that can undermine confidence in methods and instruments currently used in payments,” added the central bank.
This week, Royal Motors, which distributes Rolls-Royce and Lotus cars in Turkey, became the first company in the country to accept payments in cryptocurrencies.
Cryptocurrencies are still little used for trading, even though they are becoming more common global assets, although companies such as Tesla Inc and travel site Expedia Group Inc do accept such payments.
Tough regulatory action against cryptocurrencies by major economies has been relatively rare, with most trying to clarify the rules rather than prevent their use. Traders say such bans are difficult to enforce, and crypto markets have shaken off such moves in the past.
Turkey’s main opposition leader Kemal Kilicdaroglu described the decision as another case of “midnight bullying,” referring to President Recep Tayyip Erdogan’s decision last month – announced in a midnight decree – to fire the central bank governor. .
“It’s like they have to commit foolishness at night,” he said on Twitter.
The legislation will enter into force on April 30.
Another nightly bullying, they couldn’t get rid of this mentality. They will have a foolishness at night. Before such decisions are taken, all stakeholders are discussed. #Crypto With whom have you consulted your decision, o ruler? I sit down and consult with all stakeholders on this issue.
– Kemal Kılıçdaroğlu (@kilicdarogluk) April 16, 2021
Heavy hand
Cryptocurrency trading volumes in Turkey reached 218 billion lira ($ 27 billion) from early February to March 24, against just over 7 billion lira in the same period a year earlier, according to data from US researcher Chainalysis analyzed by Reuters.
Trade surged in the days after Erdogan replaced the bank’s governor, dropping the lira by as much as 15 percent.
Last week, Turkish authorities demanded user information from crypto trading platforms.
“Any authority that begins to regulate [the market] with a ban will get frustrated [since this] encourages fintech startups to move abroad, ”says economist Ugur Gurses.
In what would be one of the strictest policies in the world, India will propose a ban on cryptocurrencies and fines those who trade or own the assets. China banned such trading in 2017, putting the brakes on a freewheeling emerging crypto industry.
“Headlines like this at this point tend to send a bolt from the blue,” said Joseph Edwards, chief of research at crypto brokerage Enigma Securities in London, noting that similar regulatory measures in Nigeria and India “don’t even follow the line. set the needle in motion. ”.
Ahmed Faruk Karsli, CEO of Turkey’s Papara payment system, said the ban on transferring money to cryptocurrency platforms through fintech systems was unexpected.
“It’s much easier to go for a ban than to make an effort to deal with this financial technology,” he told Ekoturk TV.
“This is a regulation that worries me for my country.”