Turks flock to cryptocurrencies in search of stability
Despite a master’s degree and a steady job, a middle-class lifestyle has become increasingly inaccessible in recent years for Orhan, a 39-year-old web security expert from Turkey.
Frustrated with his rapidly eroding purchasing power, Orhan last year joined the millions of Turks who flocked to cryptocurrencies amid soaring inflation and a falling Turkish lira.
“The lira is as volatile as a shitcoin,” he said, referring to the catch-all term among crypto enthusiasts for failing digital currencies. The lira plunged around 45% 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 made a profit of $4,000 on his initial investment of $1,500 and cashed in his winnings to buy himself a new computer.
The resurgence of interest in cryptocurrency – and a scandal last year that saw the sudden shutdown of a Turkish crypto exchange that left hundreds of thousands of customers unable to access their funds – alarmed the country’s authorities who now want to regulate the sector.
President Recep Tayyip Erdogan has said that a cryptocurrency law will soon be presented to parliament. He said his government was engaged in a “war” on cryptocurrency.
The governor of Turkey’s central bank, speaking to foreign investors last month, said he was “uncomfortable” with the amount of money flowing into crypto-assets.
These concerns are shared by global regulators, who view cryptocurrencies as volatile and speculative. Many are concerned about illicit activities such as money laundering and terrorist financing facilitated by digital assets.
The increased use of digital assets can soften the impact of monetary policy decisions and reduce official control of national currencies. China banned both bitcoin and its creation, or mining, in part because it feared losing control of the money circulating in cryptocurrencies.
Bitcoin’s popularity has skyrocketed in countries where currencies are volatile and inflation is high. Turkey has the highest crypto transaction volumes in the Middle East, where volumes grew by 1,500% last year compared to 2020, according to a report on global adoption trends from specialist data provider Chainalysis .
“Research suggests that many people in the Middle East have turned to cryptocurrency to safeguard their savings against currency devaluation, a trend we see in other emerging markets like Africa and America. Latin America,” the report says, adding that the research suggests “a very significant relationship between the devaluation of the lira and [the amount of] exchange of liras on cryptocurrency exchanges”.
While Turks have long opted to hedge against the pound’s volatility by keeping their savings in dollars or euros, data suggests some of them are turning to ‘stablecoins’, which are pegged to currencies strong or other assets and act as a bridge between digital coins and national currencies.
Data from cryptocurrency specialist Elliptic showed that Turkish lira trading volumes jumped 360% in the last six months of 2021 against the most traded stablecoin, tether. CryptoCompare, a data company, calculated that nearly TL 211 billion ($15.8 billion) worth of bitcoins were traded last year, compared to just TL 20 billion in 2020.
“Looking forward, we expect crypto adoption to increase in Turkey as uncertainty surrounds lira inflation,” said Alissa Ostrove, Chief of Staff at CryptoCompare.
Last year, Turkey’s central bank announced a ban on using digital assets to make payments. More recently, the country’s banking regulator asked lenders to prevent customers from taking lira-denominated personal loans in order to invest in foreign currency or crypto-assets. Although few details have been confirmed about the upcoming bill, experts said it should focus on regulating crypto exchanges.
“From what I understand, they are looking at a law that protects cryptocurrency users,” said Elcin Karatay, managing partner at law firm Solak & Partners, who participated in consultations with parliamentarians. on regulations. “I don’t think they want to ban cryptocurrency.”
The regulation would 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 crypto platform. -cash.
Some users fear that the government is seeking to prevent them from withdrawing the proceeds of their investments from the Turkish banking system – although this would be difficult to enforce.
So far, the prospect of regulation has done little to dampen interest in Turkey. TV news channels feature bitcoin and ethereum prices alongside dollar and euro exchange rates. Halftime TV commercials at football games extol the virtues of crypto exchanges.
“When I talk about crypto, everyone — my hairdresser, my taxi driver, my waiters — asks me, ‘What are you investing in?'” said Sima Baktas, co-founder of CryptoWomen Turkey, which promotes crypto. involvement of women in the world of cryptocurrency. . “Everyone is interested.”
About a third of the nearly 2,000 people who have attended training courses run by her group are housewives, Baktas said. “They say, ‘my husband is making less money and I want to invest in crypto,'” she said.
Authorities have sought to lure people into investing in Turkish liras with a new program that promises to protect savers from exchange rate losses. Such measures are unlikely to work, analysts say, as long as Erdogan remains determined to keep interest rates well below inflation, which stood at an official rate of 36% in December and is expected to further increase in the coming months.
Orhan, the crypto trader, says that rather than seeking to regulate digital assets, the government should look at the root causes of its appeal. “They should ask themselves: why are people interested in cryptocurrency? Why are they taking this risk? he said. “When there is no stability, people look for alternatives. “
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