Crypto interest in Turkey is high, despite new regulations
Senior Quantitative Analyst, Saxo Bank
Summary: Turkey has been in the crypto spotlight over the past weeks after announcing a ban on crypto payments and after a collapse of two major crypto exchanges. Last Friday the sentiment changed slightly as the central bank governor stated that a total ban is not intended.
The crypto market in Turkey has been poorly regulated until now, and the past weeks have shown a consequence of this. In a week, two Turkish crypto exchanges have been collapsing, causing trading halts and freezing of accounts as the Turkish authorities are investigating potential fraud.
Prior to the collapse, the exchanges were experiencing a drastic boost in trading activity, triggered by the multiple factors. The heavy lira inflation (16 % year-on-year in March) and the instability of the lira have contributed to the crypto trading boost as traders seek to protect their assets. The trading surged significantly in the days after Erdogan replaced the central bank governor, causing the Turkish lira to decrease by more than 13 %.
It is well-known that some traders look to the crypto space in the search for shelter against inflation, despite the huge volatility associated with crypto investments (read more on cryptocurrencies and inflation here). One clear example is illustrated by looking at the trading volume of the cryptocurrency Tether, which is a stablecoin following the value of 1 US dollar. The crypto exchange BTCTurk has experienced drastic increases in trading volume from lira:
When checking Google Trends for the search activity for “Bitcoin” in Turkey over the past month, a clear increase in search activity appears in the past week. And looking at the global search activity, Turkey is at the top:
Wide range of crypto regulations in the pipeline
The Turkish government has been monitoring the cryptocurrency space for some time. As a consequence of the recent events, Turkey’s central bank announced on April 16 that crypto payment solutions and partnerships will be banned, taking effect from April 30, mentioning “irreparable damage” and “transaction risks” as major factors. This drastic action by a government regarding crypto regulation seemed to have an effect the crypto market as Bitcoin dropped by 4 % after the announcement.
Last Friday, the Central Bank Governor Sahap Kavcioglu stated that in addition to the announced payments ban, Turkey’s Finance Ministry is working on a wide range of crypto regulations, and details are expected to be ready in two weeks time. He furthermore slightly lightened the atmosphere by announcing that a full ban of cryptocurrencies is not in the pipeline, as “You cannot fix anything by banning crypto and we do not intend to do this” (link).
The crypto regulations in Turkey are important to follow as Turkey is one of the first countries to announce significant restrictions on the usage of crypto currencies, and crypto traders seem to be looking to the events in Turkey.
Follow news on this and other important crypto events in our regular crypto updates here.