Technology
In the midst of a currency crisis, Turkey has banned cryptocurrency payments, causing the price of bitcoin to plummet.
In Turkey, billionaire investor Ray Dalio's fear of governments outlawing bitcoin (BTC, -2.49 percent ) to preserve their currency monopoly has partially come true.
Early Friday, the currency-crisis-plagued country announced a ban on cryptocurrencies as a form of payment, dampening sentiment in the bitcoin market. The ban will go into effect on April 30th.
“It is considered that their use [crypto assets] 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 of the Republic of Turkey said in a press release titled the “Regulation on the Disuse of Crypto Assets in Payments.”
Bitcoin has been under pressure in recent hours, falling from $63,000 to $60,700 in 24 hours to trade 3 percent lower. The depreciation is almost certainly due to Turkey's decision, which could set a bad precedent for other crisis-stricken countries trying to protect their currencies. Morocco has already enacted such a prohibition, and India is expected to do so soon.
Last month, Dalio warned of impending government restrictions. “Every country values its monopoly on supply and demand control. They don't want other funds operating or competing because things could spiral out of control,” said the founder of Bridgewater Associates, the world's largest hedge fund, in an interview with Yahoo Finance.
Proponents of cryptocurrency have long argued that bitcoin is a better form of payment than gold or fiat currencies because its supply is halved every four years by a computer program known as mining reward halving. This contrasts bitcoin's monetary policy with the Federal Reserve's and other central banks' inflationary policies.
In recent years, citizens of countries facing high inflation and fiat currency crises, such as Turkey, have turned to bitcoin, raising hopes of widespread adoption around the world. Turkey's inflation reached 16 percent last week, and the lira, the country's currency, has depreciated by 10% this year after falling by 24% in 2020. Almost all of the country's goods were sold.
According to Arab News, the country sold nearly 11.7 million tons of gold in February.
It is important to note that Turkey's recent ban does not prevent Turkish citizens from trading cryptocurrencies. They can still buy bitcoin as an inflation hedge. The payments ban, on the other hand, may cause some complications for exchanges.
“Local exchanges and some global ones are using regulated payment providers like Papara and Ininal to deposit/withdraw Turkish lira,” Onur Gözüpek, cryptocurrency consultant at crypto exchange BtcTurk Pro, told CoinDesk in an email. “After April 30, these providers will not be able to send/receive payments between cryptocurrency exchanges.”
“Users will still be able to deposit/withdraw Turkish lira through banks in Turkey. Trading will not be affected,” Gözüpek added.
