Turkey embraces crypto amid currency woes

Reuters/Umit Bektas

• Country’s crypto market 12th largest in world
• Plunging currency and rising inflation
• Turks use crypto for gifts, salaries

Turkey has emerged as a significant player in the global crypto market, with $170 billion flowing into the country over the past year, ranking it 12th in the world, higher than markets such as Germany, Russia and Canada.

The Chainalysis Global Crypto Adoption Index said the surge can be attributed to Turkey’s currency challenges and soaring inflation, which reached nearly 60 percent in August 2023.

The Turkish lira’s value plummeted in 2021 after interest rate cuts by the central bank. The bank is forecast to deliver a rate rise of 500 basis points this week, a Reuters poll said.

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Turkey’s inflation rate is forecast to be 43.4 percent at the end of 2024 and 25.3 percent at the end of 2025 according to the poll.

The country’s inflation rate touched a 24-year high of 85.5 percent last year, after interest rate cuts had sparked a currency crisis, sending the lira down 44 percent in 2021 and another 30 percent in 2022. 

Turkey’s currency stood at a record low of 23.17 lira to the US dollar in June 2023, bringing its losses in the first half of the year to 19 percent. 

As of October 26, the lira was trading at 28.12 against the dollar, meaning it has lost more than 30 percent of its value so far this year.

Yasin Oral, CEO and founder of the Turkish cryptocurrency exchange Paribu, said the currency issues meant “individuals tend to seek alternatives, like cryptocurrencies, to store value, diversify their investment portfolios, and engage with new asset classes”.

Ben Zhou, based in Singapore and co-founder of the crypto exchange Bybit, agreeing, said Turks’ lack of confidence in their national currency was the prime motivator.

He told AGBI: “Cryptocurrencies are seen as a more stable store of value than the Turkish lira, which is rapidly losing its purchasing power.

“This is because bitcoin is not controlled by any government or central bank. As a result, it is less likely to be affected by inflationary policies such as quantitative easing.”

Shifting trends

One notable trend is the shifting demographic in Turkey’s crypto community. The proportion of Turkish crypto investors aged 18 to 60 increased to 52 percent in May 2023, up 12 percentage points since November 2021, according to the crypto exchange KuCoin’s report on Turkey.

Turks are adopting cryptocurrencies for personal purposes and value transfer, with 14 percent using crypto for gifting, 13 percent for peer-to-peer money transfers, 9 percent for receiving or paying salaries, and 8 percent for charitable donations, the report said. 

Turkey’s enthusiasm for crypto and blockchain extends to its plans to integrate blockchain technology into online public services. 

The digital government portal, E-Devlet, will use blockchain-based digital identities to enhance the security and accessibility of online services, vice-president Fuat Oktay said during the Digital Turkey 2023 event at the beginning of this year. 

The new security enhancement allows Turkish citizens to keep their digital information on their mobile phones and helps promote increased usage.