A ban on the use of cryptocurrency for payment by Turkey’s central bank has dropped the value of Bitcoin by 4%. This could resultantly cause the Turkish crypto market to stall.
The central bank of Turkey by way of legislation published in the Official Gazette banned the use of cryptocurrency for payment. Accordingly, cryptocurrency and any other digital asset cannot be utilized directly or indirectly to purchase goods and services.
The central bank cited transaction threats and irreparable damage as the reasons for taking this preventive measure.
However, the biggest drawback of the ban is that it would hamper the crypto market in Turkey. It was only recently that the Turkish crypto market picked up the pace and saw investors jumping onto the Bitcoin bandwagon. This was seen as protection against the depreciating lira and the inflation that increased by 16%. In places with uncertain currencies, the option of payment in cryptocurrency is desired.
The main opposition party of Turkey was quite critical of this ban as Bitcoin saw a falling rate of 4.6% at $60,333. Other crypto tokens like Ethereum and XRP also simultaneously saw a decrease of 6% and 12%, respectively.
The proposed ban on payments in crypto has gotten many in Turkey worried. But the fact is that you can still trade crypto as they are not banning the trading of crypto. The marginal holders are getting a bit scared but the long-term holders are still holding on.
This is part of a much bigger picture where this week’s crypto really was seen going mainstream with Coinbase’s historic listing. The other side of cryptocurrency is government crackdowns. As crypto rises in prominence, governments around the world are going to try to crack down on it. This has been going on for years, with China, Morocco, and might be with India too.
The underlying message is that crypto cannot be stopped as it is like shutting down the internet. Governments can make it a lot harder to access but no government has successfully been able to shut down crypto entirely.
The regulation by the central bank is in essence regarding e-money institutions and payment institutions rather than the crypto-assets themselves. Turkey has a very high inflation rate so the Turkish payment infrastructure is quite high-tech. The area which the Turkish central bank regulates is the fintech area, e-money institutions, and payment gateways.
This ban can be seen as a phase where Turkish regulators and Turkish stakeholders/community will decide what crypto regulation will look like.
Political volatility or volatility in other areas will affect cryptocurrency tendency significantly. Having had a history of high inflation, Turkish people tend to save through hard assets like gold, real estate, and now crypto assets. Changes in the economic management or economic policies may affect Turkish lira performance or cryptocurrency interest in the very short term. However, in the medium to long-term cryptocurrencies such as Bitcoin have fundamentals to attract Turkish investors.