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Turkey Seeks Haven in Crypto With Lira Plunge. Regulation Promised Soon

19 October 2018 18:15, UTC
Turkey Seeks Haven in Crypto With Lira Plunge. Regulation Promised Soon

Turkey is a wonderful and unique transcontinental country combining two concepts: the European and the one of the Middle-East. Turkey is a charter member of the UN, an early member of NATO, the IMF and the World Bank, and a founding member of the OECD, OSCE, BSEC, OIC and G-20. It is also an associate member of the EEC since 1963, joined the EU Customs Union in 1995. Still by now, its entrance in the EU is under the question.

Turkey is often called as a newly industrialized country by economists and political scientists, while the World Bank classified it as an upper-middle income country in terms of the country's per capita GDP in 2007. In 2017, the OECD expected Turkey to be one of the fastest growing economies among OECD members during 2015-2025, with an annual average growth rate of 4.9%. However, in May 2018, Moody's Investors Service lowered its estimate for growth of the Turkish economy in 2018 from 4% to 2.5%, with the consequent reduction to 2% in 2019.

Here are some interesting facts about Turkish economy:

  • The republic has the world's 13th largest GDP by PPP and 17th largest nominal GDP.

  • According to a 2014 survey by Forbes magazine, Istanbul had a total of 37 billionaires in 2013, ranking 5th in the world.

  • Despite that, in 2017 more than 5.000 high net-worth individuals (holding net assets of at least $1 million) left Turkey due to political and economical issues.

  • Turkey has been self-sufficient in food production since the 1980s. As of 2016,country is the world's largest producer of hazelnuts, cherries, figs, apricots, and pomegranates.

  • Turkey’s automotive industry produced over 1.3 million motor vehicles in 2015, ranking as the 14th largest producer in the world.

  • In the early years of the 21st century, the high inflation was brought under control, the Turkish new lira was launched in 2005, renamed back to Turkish lira in 2009. The currency and debt crisis of 2018 led to nearly 40% loss of its value to the US dollar.

Key milestones in the development of Turkish crypto industry

In 2013 Banking Supervision and Regulation Agency of Turkey made a press-release on Bitcoin, with the warnings towards the virtual currency operational risks.

In November 2017, Turkey’s Directorate of Religious Affairs said that cryptocurrency is frequently used for illegal activities, and is not regulated enough, making cryptocurrencies more volatile than classic currencies.

The same month, however, the president of the Central Bank of the Republic of Turkey – Murat CETINKAYA, has commented that the Bank is having a very optimistic and positive approach towards virtual currencies: “coins like BTC might deliver a better and new version of financial stability for the countries citizens.”

In February 2018, According to a report by Al-Monitor, Ahmet Kenan TANRIKULU, the deputy chair of Turkey's Nationalist Movement Party has drafted a report to propose a state-backed cryptocurrency called Turkcoin.

On June 19, several Turkish outlets reported ‘Turcoin’ project (not the one proposed by Tanrikulu) revealed as a Ponzi scheme, after the founders of the company fled the country with 100 million Turkish Lira collected from about 10,000 people.

The same month, Statista reported a survey with Turkey to be among the leaders of the “crypto holders” in the world.

In August 2018, the volumes on Turkey's cryptocurrency exchanges surged in contrary to the country's fiat currency plunged to record lows.

In September 2018, a service to transact Bitcoin Cash using SMS messaging, was launched in Turkey and Argentina.

Current stance on the cryptocurrencies by the Turkish government

“Turkey is in the grey zone about cryptocurrencies, but at the end of this year I guess they will release some comments or regulations concerning them,” Seyit ÖZGÜR, IT Director from Bursa, commented to journalists on current situation. “There is a closed working group focusing on the classification of crypto-assets and comprised of related regulatory authorities: The Central Bank of the Republic of Turkey, Banking Supervision and Regulation Agency and Capital Market Boards of Turkey,” Osman Gazi GÜCLÜTÜRK, the IT and blockchain lawyer, provides more clarity about the events in his blog. “But for now, the regulatory framework is mostly uncertain.”

“Law on Payment and Securities Consensus Systems, Payment Services and Electronic Money Institutions” is mostly called the closest arrangement related to the electronic money in Turkey, but with that, cryptocurrency is still not defined as a payment instrument. Nevertheless, the absence of a legal definition of crypto assets doesn’t mean the prohibition, according to the ‘principle of law’. The same situation is with Turkish tax legislation. Under current regulations, profit from cryptocurrency possession or trading cannot be included in any of the categories for private persons which means they are not subject to taxation. For corporations, gains to be derived from cryptocurrencies are subject to corporate income tax at 22%. No VAT on cryptocurrencies can be imposed for now in Turkey as well as they have no clear definition.

Rumors, rumors, rumors

“The agenda of the Turkish government is different now. Sanctions imposed by the Americans have had a negative impact on government priorities due to the economic downturn. The government of Turkey seems to be doing good if they say to explain something about crypto by the end of the year,” says Ozan TAŞ, MBA, from DenizBank.

On 21 September Minister of Economy of Turkey Republic Berat ALBAYRAK had a meeting with different people from crypto sector and mentioned that the government would enable ICOs to work and collect money in Turkey, claimed Ozal MEHMETI, founder of a token company from Istanbul. “With the new management style, there are rooms under President Office, and one of them is technology office — it helps government to get information and take faster decisions.They are open to all new technologies. They had meeting with Tesla's Elon Musk, rumors say that in 2023 Turkey will have its own electric car,” Mr. MEHMETI has a quite positive stance on the current developments. “Turkey will be one of the countries enabling blockchain to widespread. As I mentioned above, the rooms are created to bypass the bureaucracy. And they are very effective now.”

Today, Turkish citizens have full access to cryptocurrency, with the trend of a safe haven currency continues to gain ground. At the present time, it seems that the nation's officials seem more interested in generating tax revenues from cryptocurrencies than banning it. This trend is likely to continue, and investors can expect good future. Nevertheless, they should be cautious. It's possible that some of the ICO companies could be forced to cease operations according to new laws, or move to another location - it is all about the contents of upcoming laws. But with growing political tensions, this is likely to happen very soon.

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