Istanbul- Digital currencies have witnessed a significant expansion globally in recent years, attracting more investors thanks to their many advantages, such as speed, security, and low costs associated with transactions.
With increasing international recognition of digital currencies as a source of value and an investment tool, these currencies have become an integral part of the global financial system.
In this context, Turkey is witnessing an unprecedented boom in the number of traders in encrypted digital currencies, as Turkish Finance Minister Mehmet Simsek announced last week that the number of personal accounts on digital currency platforms jumped from 1.2 million in 2022 to 18 million accounts during the current year.
Şimşek added that there are 8.6 million people investing in the stock market and 12 million trading in the capital markets, noting that these numbers are considered important, especially since the number of investors in the stock market was 1.9 million people in 2020.
Simsek noted that the Turkish Central Bank and the Ministry of Education are working to include financial literacy in the school curriculum.
According to the American weekly newspaper The Coptic Letter, Turkey has the largest global share of Bitcoin ownership at 8.3%, followed by Vietnam, Nigeria and Venezuela.
New law to regulate cryptocurrencies
Next Thursday, the Turkish Parliament is preparing to discuss a new draft law presented by the ruling Justice and Development Party that includes comprehensive regulations for crypto-assets and their service providers, with the aim of protecting customers from the risks associated with this market.
This project comes after an extensive study of global experiences in this field, and includes definitions of encrypted assets and procedures for establishing and operating encrypted asset service providers with permission from the Capital Market Authority.
The project stipulates that prices will be free on the platforms, with rules ensuring transparency and fair competition. It also requires service providers to maintain secure records that can track crypto asset transfers.
The regulations also include the need for crypto asset service providers to obtain approval from the Central Bank of Turkey and comply with the standards of the Scientific and Technological Research Council, in addition to specifying penalties for unlicensed activities, which may reach imprisonment and financial fines. They are also required to pay an annual service fee estimated at 1% of the amount. Its revenues to the central bank.
Previous restrictions
Turkish banks warned their customers at the beginning of this year of the possibility of closing their credit cards if they purchased gold, foreign currencies, or cryptocurrencies through them, with the aim of reducing monthly installments and reducing the use of credit cards in the context of combating inflation.
The Banking Regulatory and Supervision Authority revealed that the use of credit cards increased by 155% in January 2024 compared to the same month in 2023, as the volume of spending through these cards during December 2023 reached about 1.2 trillion liras (about 39 billion dollars).
At the end of April 2021, the Turkish Central Bank banned the use of cryptocurrencies and assets to purchase goods and services, indicating potential “irreparable” damage and great risks in those transactions.
Impact on the economy
Inflation rates in Turkey recorded a new high, reaching 69.8% last April on an annual basis, compared to 68.5% in the previous month, in conjunction with the monetary tightening policy followed by the Turkish government with the aim of curbing inflation.
Last week, the government announced a three-year plan aimed at reducing public spending, in an attempt to break the spiral of inflation.
In this context, there is a need to control and regulate the trading of cryptocurrencies, as it is one of the financial instruments that needs strict regulation to ensure the stability of financial markets and protect the Turkish economy from severe fluctuations.
Regarding the increase in the number of Turkish personal accounts on digital currency platforms, the economic researcher at Gazi University in Ankara, Muhammad Al-Abadla, pointed out in his speech to Al Jazeera Net that the increase is due to the tendency of the young group to take risks and not take financial risks seriously, as they usually seek to achieve large profits at a time Short without calculating the risks.
Al-Abadla touched on digital currency cycles, anticipating significant rises in currencies until the US elections, with the markets rising, before the latter enters into a series of corrections that end the bull market at the end of the fourth quarter of 2025, which will lead to a significant decline in prices and the withdrawal of young people from trading.
He explained that the impact of the increased use of digital currencies on the Turkish economy is to create a liquidity crisis, as money and capital drift away from real projects towards trading projects, which leads to the economy losing manpower and young minds that could contribute to economic development.
He added that the profits resulting from trading have a personal impact on traders and their close circles, while the impact of real projects benefits society as a whole and contributes to moving the wheel of the economy.
Al-Abadla explained that trading in digital currencies contributes to increasing the personal wealth of traders at the expense of increasing the wealth of members of society in general, which leads to the emergence of large gaps between the classes of society.
Precautionary measures
The new draft law brought to mind the story of the young Turkish man Faruk Fatih Ozer, owner of the “Thodex” platform, who was known as “the biggest fraudster in the history of Turkey.”
On March 31, 2022, the Turkish court sentenced the young Turkish man to 11,196 years in prison, in addition to huge financial fines exceeding 26 billion Turkish liras on charges of serious fraud and establishing a criminal organization.
The events go back to Ozer fleeing outside Turkey after his company – which included 400,000 subscribers with investments worth two billion dollars – announced that it would stop its transactions for 5 days to carry out technical reforms.
With this announcement, citizens began submitting complaints to government agencies, which led to the opening of an investigation that ended with Ozer being brought from Albania to stand trial.
