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 “irreparable” damage and transactions.
In legislation published in the Official Gazette, the central bank stated that cryptocurrencies and other digital assets based on distributed registry technology could not be used, directly or indirectly, to pay for goods and services.
The decision could block Turkey’s cryptocurrency market, which has boomed in recent months, as investors joined the global Bitcoin rally, trying to protect themselves against the depreciation of the pound and inflation that exceeded 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 Ethereum and XRP currencies, which tend to move in tandem with Bitcoin, fell between 6 and 12%.
In a statement, the central bank said the cryptographic assets “are not subject to any regulatory and supervisory mechanism or central regulatory authority”, among other security risks.
“Payment service providers will not be able to develop business models so 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.
“Their use in payments can cause irrecoverable losses for the parties to the transactions … and may include elements that may undermine confidence in the methods and tools currently used in payments,” the central bank added.
This week, Royal Motors, which distributes Rolls-Royce and Lotus cars in Turkey, became the first business in the country to accept cryptocurrency payments.
Cryptocurrencies remain little used for trade, even as they become increasingly common global assets, although companies such as Tesla Inc and the travel site Expedia Group Inc accept such payments.
Rigorous reductions in cryptocurrencies by large economies have been relatively rare, with most seeking to clarify the rules rather than prevent their use. Traders say such bans are difficult to enforce, and crypto markets have given up such moves in the past.
Turkey’s main opposition leader, Kemal Kilicdaroglu, described the decision as another case of “midnight aggression”, referring to President Recep Tayyip Erdogan’s decision last month – announced by a midnight decree – to dismisses the governor of the central bank.
“It’s like he should be committing nonsense at night,” he said on Twitter.
The legislation enters into force on April 30.
Another aggression at midnight, they could not get rid of this mentality. They will be stupid at night. Before making such decisions, all stakeholders shall be discussed. #Crypto Who did you consult your decision with, sir? I will sit down and consult with all stakeholders on this issue.
– Kemal Kılıçdaroğlu (@kilicdarogluk) April 16, 2021
Heavy hand
Turkey’s cryptocurrency trading volumes reached 218 billion pounds ($ 27 billion) from early February to March 24, up from just over 7 billion pounds in the same period a year earlier, according to the researcher. American Chainalysis analyzed by Reuters.
Transactions rose in the days after Erdogan replaced the bank’s governor, reducing the pound to 15%.
Last week, Turkish authorities requested information from users of cryptographic trading platforms.
“Any authority that begins to regulate [the market] with a ban he will become frustrated [since this] encourages fintech startups to move abroad, ”said economist Ugur Gurses.
As one of the strictest policies in the world, India will propose a ban on cryptocurrencies and fines for those who trade or hold assets. China banned such trading in 2017, hitting the brakes of an emerging freewheel cryptocurrency industry.
“Securities like this right now tend to send a screw over the springs,” said Joseph Edwards, head of research at cryptographic brokerage Enigma Securities in London, noting that similar regulatory moves in Nigeria and India moved the needle ”.
Ahmed Faruk Karsli, CEO of Turkish payment systems firm Papara, said the ban on transferring money to cryptocurrency platforms via 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 makes me concerned about my country.”