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According to the country’s official newspaper, Resmi Gazette, the Central Bank of the Republic of Turkey has now prohibited crypto-holders from using their digital properties for transfers, as well as payment providers from transferring funds to their digital wallets at crypto-exchanges. The Central Bank of Turkey (CBRT) announced on April 30 that cryptocurrencies and other digital assets dependent on distributed ledger technologies cannot be used as payment instruments, either directly or indirectly.
“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, and will not be able to provide any services related to such business models.”
Although banks are exempt from the rules, which ensures that customers can still deposit Turkish lira on crypto-exchanges via wire transfers from their bank accounts, payment providers may not be allowed to offer deposit or withdrawal facilities for crypto-exchanges.
In Turkey, payment services and digital wallets have been commonly used to move fiat funds to crypto-exchanges and vice versa. A weaker Turkish lira, as well as inflationary pressures, had boosted demand for the cryptocurrency. Following its initial entry into the Turkish industry, Binance recently collaborated with local payment provider Papara to provide a lira onramp for several different cryptocurrencies. Ripplenet member KFH has already begun making cross-border transfers to Turkey.
Users will have two weeks to clear their accounts if they only use payment services as fiat-to-crypto-gateways under this new rule. According to the CBRT, the ban was prompted by a shortage of “central authority regulations” and “supervision mechanisms” for cryptocurrency and other related digital properties. In addition, the central bank said,
“Among other risks, cryptocurrencies “may cause non-recoverable losses for the parties to the transactions due to the lack of regulation.”
Historically, the Turkish government has maintained close control over the payment ecosystem. Turkey blocked PayPal, a large multinational payment provider, in 2016. The Turkish Ministry of Treasury and Finance declared last month their plan to oversee the crypto-ecosystem and collaborate with the Central Bank, Banking Regulation and Supervision Agency, and Capital Markets Board to control cryptocurrency.
Turkey’s crypto and blockchain platform entered 2020 with high hopes and a clear track record, having had its best year ever in terms of adoption in 2019. In August, BtcTurk, a leading local crypto-exchange, revealed that it had over 1 million customers trading on its website.
The Turkish lira’s volatile behaviour drew the attention of global markets in 2020, fueling the asset class’s prominence in the region. According to the ‘Cryptocurrency Research Study,’ the number of crypto-owners in Turkey is over 2.4 million, or about 3% of the population.