Crypto turns illegal in Turkey on April 30th

04/26/2021

Buying something with Bitcoin (BTC) in Turkey will soon be illegal, since the Central Bank of the Republic of Turkey’s April 16 announcement that it will forbid the use of cryptocurrency as a payment method. The regulation, which will go into effect on April 30, also bans the use of digital wallet providers as fiat on-ramps for crypto exchanges.

Ankara wants investors to send/receive local currency to/from crypto exchanges only through banks. Thus, the government will put the brakes on possible unregistered transactions to help fight against the unregistered economy and financing of illegal activities, such as terrorism.

Explaining the ban

This is the central bank’s way of warning people that cryptocurrencies are not monetary assets, no matter how often people call them kripto para (“crypto money” in Turkish) — thus, they can’t be used as a form of payment. The new regulation limits innovation among banking firms and cripples the development of crypto payment startups in the country, such as DigiliraPay.

DigiliraPay is one of the local companies that has been directly affected by the new regulation. Its business model incorporates a Know Your Customer process and utilizes blockchain to enable the spending of cryptocurrencies for daily shopping. While its crypto payment operations will cease to exist, the DigiliraPay team aims to improve its business model and find alternative solutions to cope with regulation.

The second part of the ban essentially means users will be unable to use local PayPal alternatives (PayPal has been banned in Turkey since 2016) to deposit or withdraw money to and from crypto exchanges.

Impact on Crypto Exchanges

Digital wallets are only one side of the fiat-to-crypto equation, the other being crypto exchanges. The regulation is more about payment providers and electronic money companies rather than crypto assets themselves. The legislation does not really change anything for crypto exchanges.

The main reason that digital wallets were used as fiat on-ramps for crypto was the lack of partnerships between banks and crypto exchanges, Users were turning to digital wallets to send and receive funds 24/7, without the need to wait an extra day if their banks didn’t have a partnership with their crypto exchange.

Legality Questions and Consequences

But what about the crypto exchanges that were planning to provide crypto payments? There are different opinions. Payments are limited to assets qualifying as funds under Law No. 6493, and crypto isn’t defined as a fund in 6493. It is expected that the central bank will clarify implementation fundamentals.

Instead of a total ban, there should be an active discussion with industry stakeholders to find solutions that will pave the way for growth within the industry. Unfortunately, these types of prohibitions will only encourage users to utilize P2P platforms, which will result in an increase in the gray economy

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