Bitcoin fell more than four percent on Friday after Turkey’s central bank banned the use of cryptocurrencies and cryptocurrency assets for purchases, citing possible risks of damage and “irreparable” transactions.
In legislation published in the Official Gazette, the central bank said cryptocurrencies and other digital assets based on distributed book technology could not be used, directly or indirectly, to pay for goods and services.
The decision could slow down Turkey’s cryptocurrency market, which has gained strength in recent months as investors joined Bitcoin’s global concentration, trying to protect itself from the lira’s depreciation and inflation that outpaced the 16% last month.
Bitcoin fell 4.6 percent, to $ 60,333 at 11:17 GMT after the ban, which was criticized by Turkey’s main opposition party. The smaller currencies, Ethereum and XRP, which tend to move in tandem with Bitcoin, fell between 6 and 12%.
In a statement, the central bank said the cryptographic assets “were not subject to any regulatory and supervisory mechanism or any central regulatory authority,” among other security risks.
“Payment service providers will not be able to develop business models in such a way that cryptographic assets are used directly or indirectly in the provision of payment services and the issuance of electronic money,” and will not provide any services, he said.
“Its use in payments can cause irrecoverable losses for parts of transactions … and include elements that can undermine confidence in the methods and instruments currently used in payments,” the central bank added.
This week Royal Motors, which distributes Rolls-Royce and Lotus vehicles in Turkey, became the first business in the country to accept cryptocurrency payments.
Cryptocurrencies are still little used for trading, although they are becoming increasingly popular global assets, although companies such as Tesla Inc and travel site Expedia Group Inc accept these payments.
The regulatory difficulties of major economies on cryptocurrencies have been relatively rare, with most wanting to clarify the rules instead of preventing their use. Traders say these bans are difficult to enforce and that, in the past, crypto markets have abandoned these movements.
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, of dismiss the central bank governor.
“It’s like they have to do nonsense at night,” he said on Twitter.
The legislation will come into force on April 30.
Another harassment at midnight, they could not get rid of this mentality. They will have some nonsense at night. Before these decisions are made, all stakeholders are discussed. #Crypto Who did you consult your decision with, governing? I will sit down to consult with all stakeholders on this topic.
– Kemal Kılıçdaroğlu (@kilicdarogluk) April 16, 2021
Heavy hand
Cryptographic trade volumes in Turkey reached 218 billion lire ($ 27 billion) from early February to March 24, compared to just over 7 billion lire in the same period last year, according to data from US researcher Chainalysis analyzed by Reuters.
Business rose in the days after Erdogan replaced the bank’s governor and dropped the lira to 15%.
Last week, Turkish authorities demanded user information on cryptographic trading platforms.
“Any authority that begins to regulate [the market] with a ban he will end up frustrated [since this] encourages fintech startups to go abroad, ”said economist Ugur Gurses.
In what would be one of the strictest policies in the world, India will propose a ban on cryptocurrencies and fines on those who operate or have assets. China banned this trade in 2017 and curbed an emerging free-wheel cryptography industry.
“Headlines like this right now tend to launch them,” said Joseph Edwards, head of research at Enigma Securities brokerage cryptography in London, noting that similar regulatory moves in Nigeria and India “don’t even go move the needle ””.
Ahmed Faruk Karsli, CEO of Turkish payment systems firm Papara, said the ban on transferring money to cryptocurrency platforms using fintech systems was unexpected.
“It’s much easier to choose to ban than to make an effort to deal with this financial technology,” he told Ekoturk TV.
“This is a regulation that worries me about my country.”