Turkey Bans Crypto as Form of Payment; Bitcoin Price Drops

On the heels of the devaluation of the Turkish currency in late March, which sent interest in bitcoin off the charts as citizens looked for ways to preserve their savings, the government announced today that it’s banning payments in bitcoin starting April 30.

According to the ban, citizens can own cryptocurrencies but not use them, and crypto exchanges will also be banned from operating in the country.

Volatility and risk are the two main reasons for the ban, according to the Turkish central bank, which said that crypto currencies are not subject to regulation or supervision by a central regulatory authority, wallets can be stolen, transactions are irrevocable, and they may be used for illegal actions due to their anonymous structure.

“Turkey’s recent crypto ban by the Central Bank is a move we have seen in other jurisdictions with similar concerns around capital flight and control of monetary policy; the bans reflect an attempt to control. Unfortunately, in our research, we have found that cryptocurrency bans don’t work,” Jesse Spiro, Chief of Government Affairs, Chainalysis, told Blockworks. “We have seen through our blockchain analytics, that after bans are enacted people continue to transact with cryptocurrencies in said jurisdictions. In fact, illicit activity is in some cases higher in these jurisdictions, a consequence of the lack of regulatory oversight and supervision.”

Last month, the lira plunged after Turkish president Recep Tayyip Erdogan unexpectedly fired Naci Agbal, the nation’s central banker—the third central bank chief in two years—for raising interest rates as a way to control inflation. However, the new central banker, Sahap Kavcioglu, has not changed interest rates since taking office.

Turkey’s ban comes two days after Coinbase’s direct listing, and at the same time as Royal Motors, distributor of Rolls Royce and Lotus in the country, announced it would accept crypto as payment for its automobiles.

Fears that other countries, including India, could also ban the cryptocurrency are impacting the price of bitcoin which hit a high of over $63,000 this week. 

India is on the brink of proposing a ban on cryptocurrencies and fines for trading or holding assets. Nigeria is looking at similar steps as officials there said that the use of bitcoin is eroding its local currency. China already has strict policies on bitcoin trading.

When it comes to other countries, Spiro said, “It’s hard to say which country might impose a ban next. For the populations in jurisdictions with unstable local currencies and economies, cryptocurrency poses an attractive stable alternative, which is reflected in an increase in investing in Bitcoin and stablecoins in those markets. This correlation provides insight into where we could hypothetically see proposed bans next.”

As for speculation that the US would ban crypto, Spiro added, “It is unlikely, in my opinion, that the US will ban bitcoin or cryptocurrency, as proper, effective regulation has been in place since 2013, and regulatory reform continues to push financial integrity in the domestic ecosystem.”

The BTC to USD rate for today is $60,984.72. It has a current circulating supply of 18.7 Million coins and a total volume exchanged of $75,525,717,374, according to CoinGecko.