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Crypto adoption has surged in recent months as more people and companies world have started using digital currencies such as Bitcoin (BTC) and Ethereum (ETH) as a mode of payment or as an investment vehicle. However, Turkey appears to be bucking the trend with its central bank recently banning the use of cryptocurrency for payments in the country.
Turkey just became the latest country to impose limits on the use of crypto. Legislation published in the Official Gazette, the Central Bank of the Republic of Turkey announced that it is banning the use of cryptocurrency for payments starting April 30, 2021.
“Crypto-assets cannot be used directly or indirectly for payments,” the central bank said. “No service can be provided for direct or indirect use of crypto assets in payments.”
The monetary authority added that companies prohibited from creating services that use crypto as a payment option. “Payment service providers cannot 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 cannot provide any services related to such business models,” the central bank added.
The legislation also placed restrictions on transactions between electronic payments firms and crypto trading platforms. “Payment and electronic money institutions cannot mediate on platforms offering trading, custody, transfer or issuance services regarding crypto assets or fund transfers from these platforms,” the bank said.
The Central Bank of the Republic of Turkey also issued a press release explaining its decision to ban crypto payments. The monetary authority said that the use of crypto assets entails significant risks to the transacting parties for a number of reasons.
The central bank pointed out the lack of regulation and supervision mechanisms as well as the volatility of crypto prices as among the risk factors. Due to the anonymity of the transactions, crypto may also be used in illegal activities. The bank also pointed out that transactions are irrevocable and wallets can be accessed by hackers.
“Recently, some initiatives have emerged regarding the use of these assets in payments,” the monetary authority concluded. “It is considered that their use in payments may cause non-recoverable losses for the parties to the transactions due to the above-listed factors and they include elements that may undermine the confidence in methods and instruments used currently in payments.”
However, the new regulation has been criticized by others with the main opposition leader Kemal Kilicdaroglu describing the decision as another case of “midnight bullying," a reference to President Tayyip Erdogan's announcement of a midnight decree firing the former central bank governor last month, according to Reuters. “It's like they have to commit foolishness at night,” Kilicdaroglu wrote on Twitter.
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