After a sweeping ban on the use of cryptocurrencies this April, Turkish President Recep Erdogan is aiming to assert financial control ahead of launching the digital Lira. Although the central bank is not opposed to using digital currency, Erdogan believes the digital Lira faces conflict with cryptocurrencies.
During a national youth meeting with representatives from 81 Turkish provinces, the firebrand Turkish president commented:
“We are in a war against Bitcoin,” Erdogan said, following questions about the central bank’s perceptions of cryptocurrencies. “Because we will continue on the road with our money, which is our fundamental identity in this matter.”
Many Turks are using cryptocurrency as a hedge on the volatility of the Lira in forex markets. That’s why crypto has become a hot topic in Istanbul ahead of the new regulatory legislation targeting cryptocurrencies. Regulations will pave the way for the implementation of the digital Lira, which Erdogan is aiming to launch by 2023.
How did such the rivalry between the President and the cryptocurrency begin? The launch of a digital currency backed by the Central Bank of the Republic of Turkey (CBRT), in partnership with the Scientific and Technological Research Council of Turkey (TÜBITAK), has been driven by a surge in the popularity of crypto in the country.
The crypto adoption was pushed by the 2018 Turkish debt crisis, which saw the country’s credit rating drop to the trash. While the value of the Lira declined by 10%, crypto purchase volume in Turkey surged by 60%.
According to a recent poll, around 20% of Turks engaged with cryptocurrencies either in payment transactions or as personal investments in 2020.
The crisis drove the long-serving Erdogan to put together a new economic development plan to recover the Turkish economy by 2023. Proposals for a digital Lira CBDC form a key part of this plan, intending to provide the CBRT monetary controls over the exponential explosion in cryptocurrency usage.
Looking at the Turkish government’s efforts to take control of fleeting capital and remittances, we can see Erdogan has chosen the strategy to promote the digital Lira as a war on other cryptocurrencies.
The coming legislation is aimed to extend protections to investors in the volatile crypto markets alongside the imposition of tax regime models like in the US and UK, with mechanisms earmarked to tackle money laundering.