Turkey has barred the use of cryptocurrencies to purchase goods and services in an effort to protect consumers against volatility and illegal activity, threatening a boom in the country’s fast-growing digital money markets.
The central bank published a regulation in its official gazette on Friday that prohibits the direct and indirect use of crypto assets as payments. The anonymous use of virtual money “may cause non-recoverable losses” and “undermine the confidence in methods and instruments used currently in payments”, a statement from the bank said.
Turkey has the largest volume of cryptocurrency transactions in the Middle East and ranks 29th out of 154 countries worldwide, according to a report last year by Chainalysis, a US-based blockchain analysis company. Turks have poured money into digital money in recent years to hedge against double-digit inflation and a 34% drop in the value of the lira against the dollar since the start of 2019. The lack of regulation and taxation has also made the asset popular, and the trend mirrors a global surge in crypto investments.
The Turkish boom poses “significant risks” when crypto is used for payments, the central bank said, citing the lack of regulatory oversight, excessive volatility, the potential for use in illicit activities, theft of digital wallets and the irrevocable nature of transactions required.
The new measures come during a time when many countries are grappling with how to regulate digital currencies, which often fall between different national watchdogs and stretch through international boundaries. In the US, for example, tax authorities have this year sought information from exchanges about users executing large transactions.
Bitcoin, the word’s dominant digital coin, hit a record of almost $65,000 earlier this week, while Coinbase, one of the biggest crypto exchanges, listed on US public markets and is now valued at about $64bn.
The regulation does not prohibit ownership of crypto assets for investment but the new rules are unclear about when a purchase of these assets constitutes a payment. Banks are excluded, which means users may still transfer money from their bank accounts to crypto exchanges.