In a sudden and surprising move, Turkey has banned the use of cryptocurrencies as payment instruments.
The Central Bank of Turkey officially announced the ban via a circular in the Resmî Gazete on April 16, 2021.
Turkish financial authorities claim that cryptocurrency assets are “neither subject to any regulation and supervision mechanisms nor a central regulatory authority.”
Because of this, officials assert that cryptocurrency transactions and payments have the potential to present non-recoverable losses for the parties involved.
There are also fears that the growing proliferation of crypto payments will be detrimental to payment methods that have been approved in the country.
The ban will officially go into effect on April 30, 2021.
Turkey battles with crypto
Turkey has been tightening its regulatory grip on cryptocurrencies recently. Earlier this month, financial authorities began demanding that crypto trading platforms and exchanges had to hand over customer information.
They claimed that these measures were being taken to fight against criminals using digital assets to skirt tax laws and finance terrorism.
The news appears to be having a negative effect on bitcoin and Ethereum prices. In the past few hours, BTC and ETH have each fallen by more than 3%.
Interest and inflation woes
These new regulations have sprung up during a period of financial unrest in Turkey.
Interest rates and inflation have also been contentious topics within Turkey. Since November 2020, the central bank has raised interest rates from 10.25% to 19%. Reuters also reports that “Turkey’s annual inflation climbed above 16% in March.”
Şahap Kavcıoğlu, the new central bank chief, is a known critic of high interest rates. Last month, he expressed disdain at the central bank’s decision to hike interest rates — claiming it hurt the general public.
Because of this, many people in the country have begun to ditch their declining lira. According to data sourced directly from Google Trends, interest in bitcoin spiked over 500% late last month while the lira nosedived by 15%.