Will Turkey become a Bitcoin bank?
The Turkish lira is falling, the passion for Bitcoin is rising – and two crypto exchanges in the country are collapsing. Will people try to move their coins now to big exchanges like Binance (get a promo code here)? The government now wants to step in and protect users with an eerily beautiful and sensational plan.
After two Bitcoin exchanges collapsed in Turkey, the government has announced a determined effort to regulate the market. Unlike other regulatory plans, however, the Turkish one is sending the international Bitcoin scene into raptures – albeit for some dubious reasons.
Namely, the government is announcing it will create an unprecedented act: As Bloomberg reports, it plans to “establish a central escrow bank to eliminate risk from counterparties.”
Yes, that could mean exactly what it sounds like: the Turkish government wants to custody the exchanges’ Bitcoins. This would make it the first government in the world to act as a “Bitcoin bank.” Details are extremely scarce, however, and inquiries from Bloomberg and other media outlets have so far gone unanswered. The regulatory framework is said to be ready in a few weeks; the Ministry of Finance, the Capital Markets Council and the Financial Supervisory Authority are already involved – and that’s it for info.
Between heaven and hell
Is it now fantastic that the Turkish government wants to hold Bitcoins? In some ways yes, in some ways no. No, because the Turkish government is likely to lack the necessary competencies to hold cryptocurrencies more securely than exchanges. And no, because there is no guarantee that the Turkish government will not abuse this power to misappropriate Bitcoins. For example, to use it to plug gaps in the currently troubled budget or foreign exchange budget.
Obviously, the Turkish government wants to interfere with the crypto markets more than any other government through the scheme. It wants to deny exchanges the right to store their own keys, and it wants to gain access to its citizens’ Bitcoins.
When it comes to exerting control, establishing a mandatory government-owned depository is a plan so simple as it is efficient that one can only admire it for its elegance. However, it goes without saying that such regulation goes against everything Bitcoin stands for.
And yet, some Bitcoiners meet it with barely concealed jubilation. After all, if a government is custodian of Bitcoins – then it’s a step in the direction Bitcoiners believe is inevitable: that Bitcoins will become the reserve currency of central banks. And if a government demands to have access to its companies’ Bitcoins – then that is a sign that Bitcoin has aroused the government’s desires. Such authoritarian regulation is not a nice thing in itself. But it is a symptom of something Bitcoiners find beautiful.
Two exchanges, two collapses – and one reason?
If the government really has an interest in Bitcoins – say, to have a silent reserve through which it can potentially stabilize government finances or the lira – the turmoil over the two exchanges, Thodex (visit here) and Vebitcoin (visit here), could just be a smokescreen. The exchanges both collapsed last week, for almost identical reasons.
On April 23, it was reported that the Thodex exchange unexpectedly went offline. The head, Faruk Fatih Ozer, has left for Albania, allegedly with two billion dollars in client funds. His lawyer says that the exchange had problems servicing payouts and sales demands due to a hack, that the two billion dollars are fantasy figures, and that Ozer fled to escape the unpleasant choice between suicide and prison. Turkish police issued an arrest warrant for him and arrested and interrogated 83 employees of the exchange in various cities.
On April 26, the Vebitcoin exchange was hit. It announced on its website that it was suspending trading because of financial shortages. Turkish authorities had frozen the exchange’s bank accounts shortly before and interrogated four employees. Further info is scarce.
According to data platforms, Vebitcoin had a daily trading volume of $60 million before the collapse, Thodex even several hundred million dollars. For both exchanges, these figures should be taken with a grain of salt: Exchanges with such high turnover do not slip into financial straits overnight, but many exchanges manipulate their numbers to give the impression of high relevance.
It is possible that the exchanges did not actually have the cryptocurrencies they were selling, but, like banks, were operating a system of partial reserves to service the Bitcoin fever in Turkey, which has just skyrocketed in the past month.
It is equally conceivable, however, that both exchanges failed not because of homegrown financial problems – but because of government pressure. Is it a coincidence that both exchanges collapsed a few days apart for almost the same reasons? What role do accounts frozen by arbitrary authorities and other hidden sanctions play?
And did the government, one might ask, use punitive measures to create the very condition it is now acting against? Or are we just constructing a conspiracy theory based on the constantly negative image that the German media paint of the Turkish government?
Knowledge and ignorance
One only knows – nothing. It could be like this, or like this – or completely different. What one does know, however, is the following: Turkey is sliding into deeper and deeper currency problems. The Turkish lira, already weakened by problems at the top of the central bank, lost even more earlier this week, due to a comment by U.S. President Joe Biden on the Armenian genocide and a claim by central bank chief Sahap Kavcioglu about (no) interest rate hikes, according to FAZ. At 10 euro cents, the lira reached a new all-time low.
What is also known is that the lira crisis has sparked a new enthusiasm for Bitcoin in Turkey. At the very least, the lira’s all-time low is matched by an all-time high in Google searches, and reportedly an all-time high in trading volume on Turkish exchanges.
However, clicking through the numbers on Coingecko, it appears that the peak of Turkish bitcoin trading occurred on April 16. This was a day before the central bank issued a ban on cryptocurrencies being used as a means of payment. So the government certainly seems to be able to influence the market.
And no matter which of the many variants that point a possible way through the thicket of incomplete information is true, history could be made around Bitcoins in Turkey at the moment for more than one reason.