Turkey bans use of cryptocurrencies and digital money for payments

Their use may cause non-recoverable transaction losses, central bank says

ISTANBUL, TURKEY - APRIL 09: People wearing protective face masks shop ahead of the start of the holy month of Ramadan on a busy market street on April 09, 2021 in Istanbul, Turkey. Turkey announced more than 55,000 new Covid-19 cases in the past 24hrs,  a new daily record since the start of the pandemic. Turkey recently lifted restrictions allowing restaurants and cafes to reopen for indoor and outdoor dining during limited hours. Fears are growing that coronavirus cases will continue to rise as the country prepares to celebrate the holy month of Ramadan starting on April 13.  (Photo by Chris McGrath/Getty Images)
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Turkey’s central bank banned the use of cryptocurrencies and crypto assets to purchase goods and services, citing “irreparable” possible damages and significant risks in such transactions.

In legislation published in the Official Gazette overnight, the Central Bank of Turkey said cryptocurrencies and other such digital assets based on distributed ledger technology could not be used, directly or indirectly, as an instrument of payment.

“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,” the bank said.

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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

A growing boom in Turkey’s crypto market had gained further pace recently, with investors hoping to both gain from Bitcoin’s rally and shelter against inflation.

A weaker Turkish lira and inflation pressures also have driven up demand for the cryptocurrency.

In a statement explaining the reason behind the ban, the bank said these assets were “neither subject to any regulation and supervision mechanisms nor a central regulatory authority”, among other security risks.

“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,” the central bank said in a statement.

Last week, Turkish authorities demanded user information from trading platforms.

Turkey’s annual inflation climbed above 16 per cent in March.

The legislation goes into effect on April 30.

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