Turkey Bans Cryptocurrencies, Bitcoin Tumbles

The Central Bank of the Republic of Turkey (CBRT) introduced the Regulation on the Disuse of Crypto Assets in Payments Friday, with the ban set to take effect April 30. The bank says that decision is based on “significant risks” posed by such assets to users.

According to the CBRT, those risks include a lack of regulation, excessive volatility in market value, the possibility to be used for illegal transactions, and the risk of digital wallets being stolen.

“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 decision prompted a sell-off in the Bitcoin market, with the value of the benchmark cryptocurrency falling by as much as 4%.

Bitcoin and other popular digital coins like Ethereum and XRP surged in value earlier this week as the exchange Coinbase (COIN) made its market debut on the NASDAQ.

The crypto market in Turkey has seen a boom in recent months as the value of the Lira continues to tumble and inflation surged above 16% in March. That market got an even bigger bump after Turkish President Tayyip Erdogan replaced the governor of the central bank in mid-March. Erdogan is pushing for lower interest rates despite the country’s extreme inflation.

The CBRT decision goes against the recent trend of digital payments becoming more mainstream. Tesla (TSLA) is now allowing U.S. residents to purchase a vehicle using Bitcoin, with CEO Elon Musk saying foreign customers will be able to do so later this year. And just this week, Royal Motors — which distributes Rolls Royce and Lotus vehicles in Turkey — said it would accept digital currencies as payment.

The leader of Turkey’s opposition party Kemal Kilicdaroglu spoke out against the move on Twitter questioning who the ruling party consulted with on its decision. In a follow-up tweet, he accused the country’s leaders of having “no tolerance for young people”.

Ankara might see some company in its ban of cryptocurrencies soon. In its latest government agenda, India proposed legislation that would create an official digital currency issued by the  Reserve Bank of India and “prohibit all private cryptocurrencies” in the country. That ban would be more extreme, punishing those who use or even hold assets in cryptocurrencies with a fine.

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