Moves by the Turkish government to impose stricter rules on cryptocurrencies — including a ban on using crypto as a means of payment and compulsory reporting of transactions above a certain size — have left retail investors and small-scale crypto traders largely unfazed.

“It seems [as though] the legislation didn’t have any effect on cryptocurrency at all,” Turkish crypto investor Arda Güney told Forkast.News

Güney’s sentiments are echoed by others active in cryptocurrency markets, including Özgür Güner, CEO of BtcTurk, one of the country’s biggest digital asset exchanges.

The most recent sign of Ankara’s desire to rein in the crypto sector is a new requirement that Turkey-based crypto exchanges must now report all cryptocurrency transactions involving 10,000 Turkish lira (US$1,200) or more to the country’s Financial Crimes Investigation Board, known as Masak.

The controversial ban went into effect on April 30, also forbidding fiat transfers to centralized cryptocurrency platforms through fintech systems. 

The regulation was announced by the treasury and finance minister, Lütfi Elvan, in a CNN Türk live broadcast, only two weeks after Thodex, one of Turkey’s biggest crypto exchanges, was involved in a US$2 billion fraud.

According to Elvan, Masak has prepared strict guidelines for cryptocurrency exchanges, with special consideration given to monitoring transactions. 

“Masak has full audit authority over crypto exchanges,” Elvan said. “Crypto trading platforms are now obliged to share information on their active users with Masak. They are liable for any suspicious activities on their platforms. They are also responsible for notifying Masak about any transactions worth over 10,000 Turkish lira within 10 days of trades.”

Only a month earlier, Turkey’s central bank had announced a ban on the use of cryptocurrencies as payment for goods and services as part of the country’s efforts to regulate digital assets. The government has been monitoring surging interest in cryptocurrencies, fearing that criminals may use them for illegal activities.

In a press release dated April 16, the central bank said crypto assets entailed significant risks, as “they may be used in illegal actions due to their anonymous structures,” and adding: “They are neither subject to any regulation and supervision mechanisms nor a central regulatory authority.”

Lira’s loss is crypto’s gain

Turks’ demand for cryptocurrencies has grown since the country’s annualized inflation rate climbed above 16% in March for the first time since 2019, with investors seeking to hedge against the sliding value of the Turkish lira and gain from Bitcoin’s bull run.

The tightening of controls in the crypto space may have been expected, and the latest rule unwelcome, but market participants, even some of the larger ones, appear to have shrugged off concerns that the sector is under threat.

Güner of BtcTurk said during an appearance on Coindesk’s “First Mover” broadcast: “The regulation is for e-money institutions and payment gateways. I don’t expect crypto regulations to go further and limit investment purposes as well.” 

Crypto investor Güney told Forkast.News: “I know the environment in Turkey very well. First, Turkey did not ban cryptocurrency in general, they only banned paying via cryptocurrency. People can still legitimately buy and hold crypto assets, but they cannot make a payment via them. 

“People are still enthusiastic about buying and trading crypto assets. It’s crazy, I can’t believe how everyone is rushing to cryptos, from the average ‘Mehmet’ to educated people,” he added. “So, in short, people are still enthusiastic and the interest is growing.”

Blow to business

Businesses and centralized digital asset exchanges have been dealt a bigger blow by the central bank’s decision. 

Scandal-hit Thodex ceased operations immediately after the latest regulation was announced and its CEO, Faruk Fatih Özer, allegedly fled the country with US$2 billion. Police in Istanbul have launched an investigation in search of Özer and the missing funds.

Yet other Turkish cryptocurrency businesses have been more sanguine about the new rule. Cointral, a digital asset exchange based in Istanbul, told Forkast.News that the ban wasn’t a cause for concern.

“They only banned payments [using cryptocurrencies]. Deposits and withdrawals are still allowed,” a Cointral representative said.

Cointral said it would maintain its standard operations with a minor change to client-facing services. 

“We had options for clients to buy gold in cryptocurrency. They can’t buy [gold] anymore, but everything else works the same as before,” the Cointral representative said.

Gold is one of Cointral’s main products, available for purchase using fiat and cryptocurrencies. Since the ban came into effect, the exchange has had to stop accepting crypto payments for the yellow metal, but the remainder of its services are unaffected by the new regulation.

Using cryptocurrencies to pay for goods and services isn’t as widespread among Turkish crypto holders as trading and long-term investing, which is another reason why the rule has had little effect on them. 

“[The] ban is not a concern, it just classifies crypto assets as commodities like gold, silver, etc., and you can’t use them for payments,” Turkey-based crypto miner and investor Mert Ataş told Forkast.News in an email. “It does not have any other negative effect on crypto traders. They are free to buy and sell their cryptos,” he said, adding: “I usually mine crypto and invest in DeFi products.” 

Altcoin mining and trading are some of the most popular activities among Turkish cryptocurrency investors. Despite initial concerns among the crypto community following the tightening of Turkey’s crypto oversight, those activities haven’t been affected by any of the recently imposed rules.

“I can tell you that the ban on crypto as a payment method did not have a lasting impact on the markets. [But] Turkish traders love to exaggerate and enter highly risky positions, so [the recent] dips [have] caused some grief to them,” Ataş explained.

The regulatory restrictions on crypto appear, in fact, to have had a lesser impact on Turkish traders than the recent market crash triggered by Tesla suspending Bitcoin payments, which resulted in US$400 billion being wiped off the crypto sector’s total market cap.

Ataş said: “It’s business as usual for everyone. We are not new to crypto. We have been into crypto since 2012, so we’ve seen everything in this market, from crypto heists to the shutdown of SilkRoad.”