According to a study by analytics service Statista, one in 4 people in Türkiye invested in cryptocurrencies in 2021. The country ranks fifth in the world for the number of people involved in trading or investing in digital assets. What causes such an interest in crypto in Türkiye? What tools are more in demand? How does the government regulate the cryptocurrency market, and what bills have been passed? Let’s sort these questions out together.
Money vanishing into thin air
The global economic crisis tends to hit countries with faltering economies harder. It all started in 2017 when Türkiye’s inflation rate began to gain momentum rapidly, although the annual inflation rate had been stable at around 10% since 2000. According to the Turkish Statistical Institute (TUIK), inflation reached 154.63% from January 2017 to January 2022. However, the independent Inflation Research Group (ENAG) reports that the inflation rate has risen to 160.76% over the past 12 months alone.
Due to considerable differences in inflation figures in various sources, a bill is being drafted prohibiting independent centers from sharing any inflation data. The penalty for sharing unconfirmed state information could be up to three years in prison.
Monetary policy and the COVID-19 pandemic were the main drivers of the crisis in the country. During coronavirus restrictions, many states implemented quantitative easing policies — that is, printing money without any substantial collateral. Citizens received it as financial support or loans with low-interest rates. Türkiye was no exception. In addition to the Turkish lira depreciating this way, the shaky economic situation was worsened by the continued policy of low-interest rates on loans. For instance, the U.S. and the U.K. have been raising key rates recently to reduce inflation, making American dollars and British pounds more valuable against currencies such as the Turkish lira.
Some people in Türkiye believe that inflation is merely the result of a depreciating state currency. But the more important issue is spending power, which has fallen nearly fourfold in the past 12 months. More than a year ago, on June 9, 2021, the dollar to lira exchange rate was $1 to ₺8.5, while as of June 9, 2022, $1 is equivalent to ₺17.2. The lira has depreciated by half. Let’s use a simple example to show how this affects people’s lives: in June 2022, Icim Light milk cost ₺5.7 per liter, whereas today its price is ₺19.95.
Given the current situation, the Turkish population began looking for and using tools to protect their savings. Holding funds in foreign currencies is one of them. Another way to preserve savings is to invest in gold. Finally, cryptocurrencies are the third option to avoid capital depreciation.
At the time of writing (ed. — late June), the crypto market experienced a downturn. For Turkish investors, the value of assets in liras remained unchanged due to the growth of the dollar. That is, if token A was worth ₺1 last year, it’s also worth ₺1 now with a 50% collapse. If a rebound happens and cryptocurrencies rise by 50%, Turkish investors and traders will profit 50% in local currency. However, crypto investments in the Turkish lira are unprofitable when considered in relation to the U.S. dollar.
In her article, “Cryptocurrency Madness in Türkiye,” Deutsche Welle Freelance Journalist, Seda Sezer Bilen, links the interest in cryptocurrencies with the excitement and dreams of people waking up rich. Onur Ocakli, a Koc Attorneys at Law lawyer, shares a different opinion: “Investments in crypto-assets are steadily increasing as the Turkish lira falls. The trend is intensifying due to the economic instability in the country.” Cryptocurrency trading or investing provides an opportunity to earn a “legal” income, as there are no restrictions, taxation, or a bill regulating the market.
Where to Buy a Dream?
As of June 2022, there are 40 crypto exchanges registered and operating in the Republic of Türkiye. Most amateur traders use centralized exchanges to trade cryptocurrencies.
In April 2022, Statista published data showing which apps of centralized crypto exchanges were most installed on devices by Turkish users. Binance takes first place, with about 10 million downloads. The second and third places were taken by Turkish exchanges: BtcTurk Pro and Paribu. In the middle of last year, another major centralized marketplace FTX also received a license to operate in Türkiye. The country is attractive for crypto exchanges as it’s the fifth-largest in the world in daily trading turnover. The more transactions, the higher the commission fees.
In fact, there is no need for any exchange to be present in the Turkish market to use their services. How does it work? To purchase tokens, one must have a bank account in Turkish lira. The account holder transfers funds to any exchange registered in Türkiye, which offers trading pairs with the Turkish lira, via an online banking app. After buying the desired coins, the investor or trader can keep them in a cryptocurrency wallet or transfer the assets to international or decentralized exchanges without keeping them in the accounts of local platforms. If the local exchange doesn’t offer the desired trading pair, one can purchase stablecoins and transfer them to global exchanges such as Coinbase, Binance, and Kraken and then conduct transactions there.
It’s possible to withdraw currency into fiat in the opposite way. If assets aren’t held on local exchanges, then they must first be transferred to Turkish exchanges, for example:
- Binance TR;
- FTX TR;
- BtcTurk, etc.
Then, you need to exchange tokens into fiat and send the funds to your account at any Turkish bank. It’s important to keep in mind that one can only send Turkish lira from the cryptocurrency exchange to oneself, from one’s wallet to one’s own bank account.
Türkiye is a real honey pot for local and international exchanges, so you can easily run into fraudsters here. “Several exchanges have halted their operations without compensating customers. For instance, the founder of Thodex, a local cryptocurrency exchange with thousands of users, allegedly fled the country with $2 billion as the exchange stopped operations,” shares Onur Ocakli. Although the risks associated with crypto investing cannot be avoided completely, he advises Turkish users to conduct transactions on reputable and licensed exchanges. Also, the lawyer recommends storing crypto-assets in cold wallets, which are less vulnerable to cyberattacks.
Current Legal Status of Cryptocurrencies in Türkiye
The only regulation that governs the cryptocurrency market in Türkiye was adopted on April 16, 2021, and came into force on the 30th of the same month. It stipulates that cryptocurrencies aren’t a legal means of payment.
As reported by a local source, the last meeting on cryptocurrency and its regulation in the Grand National Assembly of Türkiye was held on January 29, 2021. The meeting was attended by representatives from the Ministry of Industry and Technology, the Ministry of Treasury and Finance, the Revenue Administration, and the Central Bank. Influencers representing the cryptocurrency community were also invited.
The statement of Mustafa Elitaş, Turkish Minister of Economy, during the meeting, carried a positive message for the industry: “We are convinced that the bill regulating crypto-assets should be adopted as soon as possible, and this regulation should not create obstacles for business.” Meanwhile, a little earlier, on September 17, 2021, during a meeting with young people, Turkish President Recep Erdoğan said: “We definitely do not need to accept and adjust cryptocurrencies. Moreover, we have a separate war with them, a separate struggle.”
Lawyer Onur Ocakli told us that “the crypto market in Türkiye isn’t regulated in general, except for two specific issues: the ban on using crypto-assets in payments and the obligations of crypto service providers to prevent financial crimes.
Any business model that includes or facilitates crypto-asset payments is also prohibited. Before the ruling came into force, payment service providers assisted in transferring funds to crypto exchanges. Moreover, in 2021, the Turkish Financial Crimes Investigation Board, MASAK, imposed obligations on crypto-asset service providers to prevent financial crimes and money laundering. The MASAK board has also published guidelines on how they can comply with these obligations.”
Onur Ocakli also says that a comprehensive regulation on cryptocurrencies is expected to be adopted in the coming months, but a draft hasn’t yet been made available for review. Türkiye is likely to take the same approach to regulation as EU countries. Even if the new regulation comes out in the shortest possible time, it will take months for market participants to adapt. There are a number of factors complicating the regulation’s application. One is the insufficient technical capacity of the Turkish regulator to oversee and enforce the authority over crypto-asset market participants, a problem that could lead to weak regulatory enforcement, depriving investors of confidence that the market can be trusted.
