The Central bank of the Republic of Turkey has banned citizens from using cryptocurrencies as a medium of exchange and payments. The new law will take effect starting April 30, 2021, the country’s official Gazette reported Friday.
The central bank claimed that the reason for the ban was due to “irreparable” damage and significant transaction risks associated with cryptocurrencies. The bank noted that crypto wallets are vulnerable to theft and crypto transactions are irrevocable, hence crypto assets are a poor medium of exchange.
The ban comes after Turkish authorities demanded user information from crypto trading platforms last week. The central bank stated, “Payment service providers will not be able to develop business models in a way that crypto assets are used directly or indirectly in the provision of payment services and electronic money issuance.”
The statement continued, “Their use in payments may cause non-recoverable losses for the parties to the transactions… and include elements that may undermine the confidence in the methods and instruments currently used in payments.”
The central bank also referred to crypto and any other related digital assets based on distributed ledger technology as assets that were “neither subject to any regulation and supervision mechanisms nor a central regulatory authority.”
Therefore, one of the reasons why Turkey banned cryptocurrency payments is because of its inability to effectively monitor the excessive volatility in the crypto market and control the use for illegal businesses.
The ban holds only for payment providers as they will be unable to provide deposit or withdrawal services for crypto exchanges. However, crypto users are allowed to deposit Turkish lira on crypto exchanges via wire transfers from their bank accounts as banks are excluded from the regulation.
The decision taken by the Turkish authorities to ban the use of crypto for payments met opposition from some individuals. One of the opposers, Kemal Kilicdaroglu, a Turkish social democratic politician, referred to the decision as another case of “midnight bullying”. He mentioned in a tweet, “It’s like they have to commit foolishness at night.”
Another opposer, Ugur Gurses, a Turkish financial and economic columnist for the daily Radikal newspaper, also commented saying; “Any authority which starts regulating (the market) with a ban will end up frustrated (since this) encourages fintech startups to move abroad.”
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