Despite having a master’s degree and a stable job, a middle-class lifestyle has felt increasingly unattainable for Orhan, a 39-year-old Turkish web security expert, over the past few years.
Frustrated by its rapidly declining purchasing power, Orhan joined the millions of Turks who flocked to cryptocurrencies last year amid rising inflation and a dive into the Turkish lira.
“The lira is as volatile as a shitcoin,” he said, referring to the catch term among crypto enthusiasts for failed digital currencies. The lira fell by about 45 percent against the dollar in 2021. “When there are so many economic problems [in our country]”People are looking for other ways to make money,” said Orhan, who did not want his second name published.
Orhan earned a profit of $ 4,000 on his initial $ 1,500 investment and exchanged his profits to buy him a new computer.
The surge in interest in cryptocurrency – and a scandal last year that caused the sudden closure of a Turkish cryptocurrency exchange that left hundreds of thousands of customers without access to their funds – has upset the country’s authorities who now want the sector regulate.
President Recep Tayyip Erdogan said a law on cryptocurrencies would be submitted to parliament soon. He said his government was waging a “war” against cryptocurrency.
The governor of Turkey’s central bank spoke to foreign investors last month, saying he was “uncomfortable” with the amount of money flowing into cryptocurrencies.
This anxiety is shared by global regulators, which considers cryptocurrencies to be volatile and speculative. Many are concerned about illegal activities such as money laundering and terrorist financing facilitated by digital assets.
The increase in the use of digital assets could dampen the impact of monetary policy decisions and reduce official control of national currencies. China has banned both bitcoin and its creation, or mining, in part due to concerns that it will lose control of money flowing to cryptocurrencies.
The popularity of bitcoin shot up in countries with volatile currencies and high inflation. Turkey has the highest crypto-transaction volumes in the Middle East, where volumes expanded 1,500 percent last year compared to 2020, according to a report on global acceptance trends from specialist data provider Chainalysis.
“Research indicates that many in the Middle East have turned to cryptocurrency to preserve their savings against currency devaluation, a trend we see in other emerging markets such as Africa and Latin America,” the report said, adding that research indicates “a highly significant relationship between lira devaluation and [the amount of] lira trades on crypto-currency exchanges ”.
While Turks have long chosen to protect themselves against lira volatility by keeping their savings in dollars or euros, data suggests that some of them turn to “stablecoins”, which are pegged to hard currencies or other assets and as a bridge between digital coins serve. and national currencies.
Data from cryptocurrency specialist Elliptic showed that the trading volumes of Turkish lira have increased by 360 percent over the past six months of 2021 against the most traded stable currency, tether. CryptoCompare, a specialist data company, calculated that nearly TL211 billion ($ 15.8 billion) of bitcoin was traded last year, compared to just TL20 billion in 2020.
“Looking ahead, we expect crypto-adoption in Turkey to increase as uncertainty surrounds inflation of the lira,” said Alissa Ostrove, chief of staff at CryptoCompare.
Turkey’s central bank last year announced a ban on the use of digital assets to make payments. More recently, the country’s bank regulator has urged lenders to stop customers from taking out personal loans denominated in lira to invest in foreign currency or crypto-assets. Although few details have been confirmed about the upcoming bill, experts said it is expected to focus on regulating crypto exchanges.
“From what I understand, they’re looking at a law that protects users of cryptocurrency,” says Elcin Karatay, a managing partner at law firm Solak & Partners, which has been consulting with lawmakers on the regulations. “I do not think they want to ban cryptocurrency.”
Regulation will be positive for the industry if it “supports the sector, protects investors, contributes to the economy and ensures compliance with international markets”, said Onur Altan Tan, CEO of Bitci, the Turkish cryptocurrency platform.
Some users fear that the government may try to prevent them from taking the proceeds of their investments from the Turkish banking system – even if it would be difficult to enforce them.
For now, the prospect of regulation has done little to dampen interest in Turkey. TV news channels offer bitcoin and ethereum prices along with the dollar and euro exchange rates. Half-time television commercials at football matches show the virtues of crypto exchanges.
“When I talk about crypto, everyone – my hairdresser, my taxi driver, my waiters – asks, ‘What are you investing in?'” Says Sima Baktas, co-founder of CryptoWomen Turkey, which promotes female involvement in the crypto-currency world. . “Everyone is interested.”
About a third of the approximately 2,000 people who participated in training courses offered by her group are housewives, Baktas said. “They say, ‘my husband earns less money and I want to invest in crypto,'” she said.
Authorities have tried to lure people back to Turkish lira investments with a new scheme that promises to protect savers from exchange rate losses. Such steps are unlikely to work, analysts say, as long as Erdogan stays fit to keep interest rates well below inflation, which stood at an official rate of 36 percent in December and is expected to rise further in the months what lies ahead.
Orhan, the crypto-trader, says that, rather than trying to regulate digital assets, the government should investigate the root causes of its appeal. “They should ask: why are people interested in cryptocurrency? Why are they taking this risk? ” he said. “When there is no stability, people look for alternative solutions.”
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