Current Economic Situation in Turkey
Source: Made in Turkey Tours
The Turkish lira (TL), with the symbol ₺, is the official currency of the Republic of Turkey. It is currently valued at around 34 TL per USD, portraying succinctly the present struggle of the Turkish economy against the US dollar.
While the Turkish economy is recording impressive growth, it is yet to tackle the problem of a high inflation rate. According to the Turkish Statistical Institute report for October 2024, there was a 48.58% annual increase and a 2.88% monthly increase in prices of consumer goods and services.
The report also gave a breakdown of the price increments, highlighting education (93.66%) and transportation (26.14%) as the sectors with the highest and lowest yearly increment respectively.
Despite its high inflation rate and the staggering 9.3% unemployment rate, the International Monetary Fund (IMF) has placed Turkey as the 17th largest world economy, which is an applaudable improvement from its 19th place in 2022.
The Turkish economy is diversified, enabling it to generate revenue from different sectors. Its current Gross Domestic Profit (GDP) ranges around $1,113.56 billion and, in 2023, Turkey made $29.6 billion from the exportation of vehicle and vehicle parts alone. Beyond the industries sector, the country is also thriving in the domestic sector with $9.93 billion made from crotchet items, in 2023.
Moreover, Turkey has also positioned itself for technology-driven economic growth by launching the National Technology Initiative. The International Trade Administration (ITA) published that the purpose of this initiative is to:
…enhance digital infrastructure, boost innovation, and foster digital skills among its population… [,] position Türkiye as a leader in digital technologies and ensure the country remains competitive in the global market. The focus areas include e-government services, digital economy regulations, and public-private partnerships to support digital transformation.
The digital sector has contributed substantially to the Turkish economy, therefore the government’s plan to further develop the space is justifiable.
In 2023, communication technology created 52,000 new employment opportunities, while information technology delivered 185,000 new hires. With both branches now worth over $33 billion cumulatively, it can be derived that Turkey provides an enabling environment for digital investments, and cryptocurrencies are bound to thrive in such spaces.
Crypto Law in Turkey
Source: Deposit Photos
Cryptocurrencies and other digital assets have gone through a series of reformations to arrive at the new cryptocurrency bill which came into effect on July 2, 2024. These reforms are necessary for Turkey to catch up with the world’s changing financial and technology landscape.
The Turkish Parliament, in 2019, passed Development Plan 11, which also catered for the setting up of an Association of Payment Services and Electronic Money Institutions, and adopted a national digital currency to be issued by The Central Bank of the Republic of Turkey (TCMB).
However, it was not until April 2021 that the Turkish government made official its definitions of cryptocurrency and declared its stand on cryptocurrencies. These declarations were made through the new cryptocurrency bill, Law No. 7518, which is a modification of Capital Markets Law No. 6362 of December 2012. This amendment looks into all crypto transactions including buying, selling, and holding.
It also addressed the operations of crypto firms, which it recognizes as Crypto Assets Service Providers (CASPs). The law makes a clear distinction between Crypto Assets Service Providers and Crypto Asset Custody Services (CACS).
CASPs are companies that offer crypto services such as sales, purchasing, and holding of digital assets, whereas CACS are the Board-controlled bodies that handle the custody of crypto assets for customers, including the protection of wallet private keys.
Considering the sensitivity of these service providers, such firms require licensing from the Capital Market Board (also known as Board). The Board will also monitor and dictate the transactions that the providers are allowed to carry out. Some other provisions of the new regulation include:
- 8 to 15 years jail time and fees for any persons or company found guilty of misappropriating crypto funds in their custody.
- 3 to 5 years jail time and fees for CASPs operating without the required license.
- All automated teller machines (ATM) that change cash for digital assets must be discontinued within three months, starting July 2, 2024.
- Shareholders of CASPs must not be considered bankrupt under Law No. 2004.
- Shareholders must have no financial criminal records.
Turkey’s regulations can be considered lenient in comparison with those of other countries. For one, the country’s decision to scrap crypto taxations can make it more appealing for investors. This will in turn greatly impact the extent to which the crypto industry can contribute to Turkey’s economic growth.
Current State of Crypto Adoption in Turkey
Source: IT Pulse
Turkey’s crypto adoption rate is astounding. As documented by Binance in 2023, over 52% of people between 18 and 60 years in Turkey are holders of digital assets. Even so, Statistica projects that come 2025, over 26.21 million Turkish people will hold or actively transact in cryptocurrencies.
The user penetration rate of cryptocurrency in Turkey points directly to the presence of efficient and trustworthy crypto exchanges and custody providers. Therefore, following the new regulation, several notable crypto service providers like Paribu, KuCoin, and Coinbase, amongst others, have gone on to obtain licenses to operate in Turkey.
Moreover, the Turkish government is making strategic moves towards expanding its technology sector and by extension, creating a supportive space for blockchain operations. In its Medium-Term Plan 2024-2026, Turkey set the goal of bringing inflation down to 7% by 2027. Investing in technology is one of its strategies to achieve this.
Türkiye’s strategy to integrate blockchain technology into its economy and its plans to regulate and tax cryptocurrencies align with global movements toward adopting digital currencies. These efforts could position Türkiye as a key player in the global blockchain and cryptocurrency markets, attracting foreign investment. Moreover, upcoming regulations on cryptocurrency exchanges aim to enhance transparency and monitoring, further securing Türkiye’s position in the digital economy.
Factors Affecting the Adoption of Crypto in Turkey
Source: Forbes
There are several factors responsible for the high adoption rate of cryptocurrency in Turkey, but the most prominent are the inflation rate and the scrapping of crypto taxation by the government. With the Turkish lira consistently losing its value against the US dollar, adopting and saving in cryptocurrency has been beneficial in helping Turkish residents to match the constantly rising cost of living.
Up until July 2024, the major challenge associated with the adoption of crypto in Turkey was its regulation. The absence of protection by the government heightened the Turkish citizens’ sensibility of risk. This has however been doused by the new crypto law of July 2, 2024.
In addition to this, the Turkish government has taken a further step to scrap the tax on crypto, thereby reducing the cost of operations for blockchain companies and making Turkey more attractive for them to establish in and onboard users.
Usage in Various Sectors in Turkey
Crypto adoption in Turkey is also motivated by the solutions provided by companies using blockchain technology. Coinbase, for example, allows users to create a wallet on their platform where they can receive payment in USD and convert to crypto or to the Turkish Lira.
Another platform, DigiliraPAY, renders a similar payment service, providing a system for seamless business-to-customer (B2C) relations by enabling users to pay for products or services in crypto, while the vendors receive the payment in lira.
Coin Newsify, however, deviates from payments services to cater to blockchain writers and researchers. Its technology uses artificial intelligence (AI) to filter through news and categorize them according to the user’s preference.
The digital asset space in Turkey is versatile and the Central Bank is not left out. The launching of a Central Bank Digital Currency (CBDC), which will be known as the Digital Lira, is still under consideration. However, launching the digital lira may not be enough to drive adoption on a national digital currency. This launch should be accompanied by a crypto card, which will add more utility to the token.
By officially adopting the digital lira and incorporating a crypto card, the government will succeed in skyrocketing interest and trust in crypto by the Turkish people.
Benefits of Crypto in Turkey
The presence of cryptocurrency in Turkey has provided citizens a leverage against the country’s high inflation rate and unfavorable employment conditions.
Unemployment in Turkey is as high as 8.60% and the fortunate salary earners are constantly battling the devaluation of their currency. In an attempt to ease the financial burdens of its people, Turkey increased minimum wages at the beginning of the first and second half of 2022 and 2023. However, this was unprofitable as inflation outbid these salary increments and reduced their purchasing power.
The mid-year minimum wage increase has now been discontinued to enable the government seek more strategic ways to reduce inflation. But, while this remains in the works, the Turkish people have begun exploring beyond earning in Turkish Lira and saving in cryptocurrencies.
Crypto is therefore highly beneficial in Turkey as it is empowering Turkish citizens with the opportunity to work in crypto start ups, earn in crypto, and ultimately, increase their purchasing power.
Conclusion
Turkey has positioned itself for digital economic growth through its recent reforms. Particularly, its tax-free system for crypto provides a strong incentive for more investors to come in and more users to get onboarded.
Despite its Medium-Term 2024-2026 plan and the goal to beat inflation, the World Bank and the Economic Intelligence Unit still foresees the inflation to cause a 3% decrease in Turkey’s GDP. The gap between the predictions of these bodies and the goal of the Republic of Turkey will be dependent on factors such as digital incorporations and advancements.
The benefits of cryptocurrency transcends the users and also trickles down to the Turkish economy. Statistica predicts that $139.2 million in revenue will be realized from crypto transactions in Turkey, by December 2024.
Therefore, with more than half of the population onboarded and the new regulations ensuring order and safety, the crypto market could launch Turkey into a new era of economic growth driven by digital technology.
