The Turkish central bank banned the use of cryptocurrencies as a form of payment from April 30, saying the level of anonymity behind the digital tokens brings the risk of “non-recoverable” losses.
The curbs also prohibit companies that handle payments and electronic fund transfers from processing transactions involving cryptocurrency platforms, according to a decree published in the official government gazette on Friday.
A lack of regulation, supervision mechanisms or central regulatory authority, combined with the potential for criminal activity and the high volatility of their market value, mean digital tokens entail “significant risks,” the central bank said in a statement on its website.
In March, the Treasury and Finance Ministry said it shared the “global concern” about the development of cryptocurrencies. The ministry signaled it was working on regulations in cooperation with the central bank, the banking regulator and Turkey’s capital markets board.
Complaints from Turks mentioning cryptocurrencies soared by 8,616 per cent in February from a year earlier, according to data from consumer forum Sikayetvar.
European Central Bank President Christine Lagarde in January took aim at Bitcoin’s role in facilitating criminal activity, saying the cryptocurrency has been enabling “funny business.” India will propose a law that bans cryptocurrencies and fines anyone trading or holding such assets, Reuters reported in March, citing an unidentified senior government official with direct knowledge of the plan.
Bitcoin has surged 111 per cent this year to trade above US$60,000, while ethereum, the second-largest cryptocurrency, has jumped 225 per cent.
More Turkish investors moved into cryptocurrencies, along with equities, as they cashed out of some of their foreign-exchange holdings after the unexpected removal of central bank governor Naci Agbal triggered a drop in the lira, Dunya newspaper reported on April 5.
Trading volume in cryptocurrencies almost tripled to US$2.8 billion between March 20-24, from about US$1 billion in the same period last year, the newspaper reported, citing Chainanalysis data.
Kemal Kilicdaroglu, leader of Turkey’s main opposition party CHP, criticized the government in a tweet for failing to discuss the ban with all cryptocurrency participants before announcing the ban.
The regulation should have been “communicated in a better way given the level of disinformation,” said Ozgur Guneri, chief executive officer of BtcTurk, one of Turkey’s largest cryptocurrency platforms in terms of number of clients.
“Users won’t have a hard time making investments in digital currencies, business will go as usual,” he said. “This mainly targets electronic payment systems.”