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Central Bank of Turkey Bans Use of Cryptocurrency for Payments

After completing a series of governmental studies, the Central Bank of the Republic of Turkey (CBRT) issued new guidance on cryptocurrencies.

Crypto Payment Ban

According to its official government website, the CBRT recently studied the risks of cryptocurrency within the country. The CBRT determined that “Crypto assets entrail significant risks,” including a lack of supervision and regulation, volatility, illegality and money laundering, theft of crypto wallets, and more.

As a result of completing the studies, the CBRT decided to ban the use of cryptocurrency as a form of payment. The announcement of the ban was made on April 16.

This comes as the Turkish economy has seen heightened uncertainty in the past few years. The Turkish lira has been one of the world’s worst performers this year, which further exacerbates the inflation issues. Turkey has experienced double-digit inflation in the past few years, marking further uncertainty.

As a result of the building uncertainty, the people of Turkey have been diversifying their assets with cryptocurrency against a potential downfall of the Turkish lira and the overall economy. The Turkish lira is down nearly 25% this year alone.

Potential Fraud

To make matters worse for the currency and the general economy, the potential for fraudulent cryptocurrency activity exists in the country. Thodex and Vebitcoin, two popular crypto trading platforms, recently shut down following the announcement from the CBRT.

In total, there are more than 400,000 users between these two exchanges and more than $2 billion in investor funds that have been frozen. Turkish investors worry that their money may be gone, as dozens of people have been arrested and several more have fled the country.

New Risks

While many crypto bulls are touting Bitcoin, Dogecoin, and other cryptocurrencies as a “safe haven” and destined to skyrocket, things are not so cut-and-dry. The overall cryptocurrency world is unregulated and riddled with issues, many of which were posed by Turkey’s central bank in its recent announcement. While they likely banned use of crypto for payments to stabilize their economy and strengthen the lira, they may not be wrong about the general risks of using and holding cryptocurrency.

It only takes a major event or announcement like the CBRT notice or the two aforementioned Turkish crypto exchange shutdowns to trigger massive volatility in such markets. Thus, it is more important than ever to exercise caution while participating in the crypto area.

Contact the securities attorneys at Vernon Litigation Group at 239-319-4434 for a confidential, no-cost consultation today.

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