The Central Bank of the Republic of Turkey (Türkiye Cumhuriyet Merkez Bankası) (“Turkish Central Bank”), on April 16, 2021, issued a press release prohibiting the use of crypto assets for payments. The Turkish Central Bank believes that the use of crypto assets may entail significant risks causing ‘non-recoverable’ losses for the parties involved in the transaction, and may undermine the ‘confidence in methods and instruments used currently in payments’. The reasons cited for the prohibition are (a) lack of a regulatory mechanism or supervision from a central regulatory authority; (b) volatility; (c) concerns regarding usage in illegal actions; (d) wallets may be stolen without authorisation from holders; and (e) irrevocability of transaction.
For the above purpose, the Turkish Central Bank has introduced the ‘Regulation on the Disuse of Crypto Assets in Payments’ (“Regulation”), which shall go into effect from April 30, 2021. Article 3 of the Regulation prohibits the use of crypto assets, directly or indirectly, for payments, and further prohibits services relating to crypto-assets being offered. Moreover, Article 4 provides that payment service providers may not develop any business models in which crypto assets are linked, and payment and electronic money institutions cannot mediate on platforms that offer trading, custody, transfer or issuance services for crypto assets.
Turkey has introduced one of the strictest bans on cryptocurrencies, given that the Turkish crypto-economy had arisen to approximately EUR 22 billion in value. The ban is extended to all crypto-assets, which use distributed ledger technology, and are issued as fiat money, deposit money, electronic money, payment instrument, security or other capital market instrument, that are not qualified.
It is ironic, however, that while the Turkish Central Bank cites ‘volatility’ as one of the reasons for the ban, exotic currency, the Turkish lira is known for its many devaluation and none as fast as the recent devaluations in the past few months, with inflation currently at about 15% and the Turkish lira plunging almost 16% in one day.
Authored by Shivani Agarwal, Founder and Samaksh Khanna, Co-founder.
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