Turkey Bans Cryptocurrency Use for Payments as Local Currency Plunges
The Central bank of the Republic of Turkey has issued a cryptocurrency regulation prohibiting the use of cryptocurrencies for payments of goods and services. From the end of this month, crypto assets cannot be used directly or indirectly as a means of payment in the country and no service can be provided for this purpose.
Turkish Central Bank Prohibits Crypto Use for Payments of Goods and Services
The Turkish central bank (also known as CBRT or TCMB) has issued “Regulation on the Disuse of Crypto Assets in Payments.” It was published Friday in the official newspaper of the Turkish government.
The central bank also announced Friday that “studies on the regulation regarding the disuse of crypto assets in payments have been completed.” The TCMB wrote:
Recently, some initiatives have emerged regarding the use of these assets in payments. It is considered that their use in payments may cause non-recoverable losses for the parties to the transactions.
The bank described that “Crypto assets entail significant risks to the relevant parties,” citing factors such as excessive volatility, lack of regulation, and irrevocable transactions. The TCMB further warned that crypto assets “may be used in illegal actions due to their anonymous structures” and “wallets can be stolen or used unlawfully without the authorization of their holders.”
In addition, the central bank claims that there are also “elements that may undermine the confidence in methods and instruments used currently in payments.”
The official notice states that the purpose of this regulation is to prohibit the use of crypto assets in payments, directly or indirectly, within “the provision of payment services and electronic money issuance.” The notice details:
Crypto assets cannot be used directly or indirectly for payments … No service can be provided for direct or indirect use of crypto assets in payments.
The notice further warns that “Payment service providers cannot develop business models in a way that crypto assets are used directly or indirectly in the provision of payment services and electronic money issuance.” They also “cannot provide any services related to such business models.”
Furthermore, the central bank’s notice explains that “Payment and electronic money institutions cannot mediate on platforms offering trading, custody, transfer or issuance services regarding crypto assets or fund transfers from these platforms.”
This crypto regulation will enter into force on April 30, 2021, the notice concludes, adding that it is enforced by the governor of the Central Bank of the Republic of Turkey.
The Turkish lira has lost significant value in the last 12 months. It plunged about 16% in one day on March 2 after former central bank governor Naci Agbal was fired and replaced by Sahap Kavcioglu, the fourth central banker chief in two years.
The local currency’s dramatic slump helps fuel interest in cryptocurrency in Turkey. Cryptocurrency trading volumes between the beginning of February and March 24 hit 218 billion lira ($26 billion) with a spike on the weekend of Agbal’s departure, Reuters reported, citing data from U.S. blockchain data analytics firm Chainalysis. The trading volumes in the same period last year totaled only a little more than 7 billion lira.
What do you think about Turkey banning crypto for payments? Let us know in the comments section below.