By Ece Toksabay
ANKARA (Reuters) – Turkey’s central bank has banned the use of cryptocurrencies and cryptocurrencies to buy goods and services, citing potential “irreparable” damage and significant transaction risks in a move that is lowering global bitcoin prices cooled down.
In the legislation published in the Official Gazette on Friday, the central bank said cryptocurrencies and other such digital assets based on distributed ledger technology could not be used directly or indirectly as a means of payment.
The growing crypto market in Turkey has gained momentum over the past few months when investors joined a global meeting in bitcoin to protect against lira depreciation and inflation, which was 16% higher last month.
Bitcoin was down nearly 3% at $ 61,490 against the dollar at 0754 GMT after the Turkish ban, which was criticized by the main opposition party.
In a statement, the central bank said that crypto-assets “are not subject to any regulatory and supervisory mechanisms or a central regulatory authority”, including security risks.
“Payment service providers will not be able to develop business models in such a way that crypto-assets are used directly or indirectly in the provision of payment services and the issuance of electronic money,” and they will not provide any services.
“Its use in payments can cause irrecoverable losses for the parties to the transactions … and it contains elements that could undermine confidence in the methods and instruments currently used in payments,” the central bank added. .
This week, Royal Motors, which distributes Rolls-Royce and Lotus cars in Turkey, became the first in the country to say it would accept payments in cryptocurrencies. Globally, giants like Apple, Amazon and Expedia also accept such payments.
‘BULLING’
Opposition leader Kemal Kilicdaroglu called the ruling another “midnight bullying”, citing President Tayyip Erdogan’s decision last month – announced in a midnight decision – to fire the central bank governor.
“It’s like they have to commit stupidity at night,” he said on Twitter.
Turkish annual inflation is six months high at 16.19%, well above a target of 5%, and unemployment remains high, at 13.4%.
Crypto-trading volumes in Turkey reached 218 billion lira ($ 27 billion) from early February to 24 March, compared to just over 7 billion lira in the same period a year earlier, according to data from US researcher Chainalysis analyzed by Reuters .
The data traded 23 billion lira in the first few days after Erdogan shocked markets by evicting the head of the central bank last month, according to the data against 1 billion lira throughout March 2020.
Last week, Turkish authorities demanded user information from crypto-trading platforms.
“Any government that starts regulating the market with a ban will get frustrated (as it) encourages fintech companies to relocate abroad,” economist Ugur Gurses said on Twitter.
The legislation will come into force on 30 April.
($ 1 = 8,0800 lira)
(Edited by Kim Coghill, Jonathan Spicer and Gareth Jones)