Bitcoin crashes after Turkey banned crypto payments, citing risks

ANKARA, April 16 (Reuters) – Bitcoin fell more than 4% on Friday after Turkey’s central bank banned the use of cryptocurrencies and crypto assets for purchases, citing possible “irreparable” damage and transaction risks.

In legislation published in the Official Gazette, the central bank said that cryptocurrencies and other such digital assets based on distributed ledger technology could not be used, directly or indirectly, to pay for goods and services.

The decision could stall the Turkish crypto market, which has gained momentum in recent months as investors joined the global bitcoin rally to hedge against the lira depreciation and inflation above 16% last month.

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Bitcoin fell 4.6% to $ 60,333 at 1117 GMT following the ban criticized by Turkey’s largest opposition party. Smaller Ethereum and XRP coins, which tend to move with Bitcoin, fell between 6% -12%.

In a statement, the central bank said that, among other security risks, crypto assets are “neither subject to regulatory and supervisory mechanisms nor a central regulatory authority.”

“Payment service providers will not be able to develop business models in such a way that crypto assets are used directly or indirectly in the provision of payment services and e-money issuance” and do not provide any services, it said.

“Their use in payments may cause non-recoverable losses to the parties to the transactions … and contain elements that may undermine confidence in the methods and instruments currently used in payments,” the central bank added.

This week, Royal Motors, which sells Rolls-Royce and Lotus cars in Turkey, became the first company in the country to accept payments in cryptocurrencies.

Cryptocurrencies remain underused for trading, even as they become increasingly mainstream global assets, despite companies like Tesla Inc (TSLA.O) and travel site Expedia Group Inc (EXPE.O) accepting such payments.

Tight regulatory measures against cryptocurrencies by major economies have been relatively rare, with most trying to clarify rules rather than preventing their use. Traders say such bans are difficult to enforce, and the crypto markets have dismissed such moves in the past.

Turkey’s main opposition leader, Kemal Kilicdaroglu, described the decision as yet another case of “night bullying,” referring to President Tayyip Erdogan’s decision last month – announced in a midnight decree – to dismiss the central bank governor .

“It’s like doing stupid things at night,” he said on Twitter.

The law comes into force on April 30th.

HEAVY HAND

The volume of crypto trading in Turkey reached $ 218 billion from early February to March 24.

Trade soared in the days after Erdogan replaced bank governor, sending the lira down as much as 15%.

Last week, the Turkish authorities requested user information from crypto trading platforms.

“Any agency that starts with a ban on regulating (the market) will end up frustrated (as it encourages fintech startups to go abroad,” said economist Ugur Gurses.

In one of the strictest guidelines in the world, India will propose a ban on cryptocurrencies and fines for those who trade or hold the assets. China banned such trading in 2017, slowing a free-running, burgeoning crypto industry.

“Headlines like this currently tend to send a bolt of lightning in the bow,” said Joseph Edwards, head of research at crypto broker Enigma Securities in London, while also noting that similar regulatory measures in Nigeria and India “didn’t even move the needle “. “.

Ahmed Faruk Karsli, CEO of Turkish payment systems company Papara, said the ban on sending money to cryptocurrency platforms through fintech systems was unexpected.

“It is much easier to decide to ban it than to make an effort to deal with this financial technology,” he told Ekoturk TV.

“This is a regulation that worries me about my country.”

($ 1 = 8.0800 Lira)

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Editing by Shri Navratnam and Kim Coghill

Our Standards: The Thomson Reuters Trust Principles.

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