State of Crypto Investments in Turkey – Cryptocurrencies continue to gain ground in Turkey in a less than rosy context for the lira, the national currency. Adoption of bitcoin (BTC) and its younger siblings is suffering at the moment though – as is the case in most other countries – the absence of clear regulations dedicated to cryptocurrencies, which would be resolutely favorable to their development.
Cryptocurrencies and Turkish digital currencies: investment against inflation, project without benefit for citizens
Selva Ozelli, international tax lawyer and CPA – Ccertified public accountantdiscusses key points of the adoption of cryptocurrencies in Turkey in his article of January 23, 2022 published on Cointelegraph.
She cites the factors that led to a collapse of the crypto markets at the start of 2022. Selva Ozelli thus evokes three events that would be responsible for these unexpected bear markets, particularly for bitcoin and ether (ETH):
- the release of minutes from the US Federal Reserve’s December meeting which suggested an earlier-than-expected interest rate hike;
- the riots in Kazakhstan which unplugged around 13% of bitcoin mining operations;
- the global spread of the Omicron variant of covid-19 hampering “long-term social and economic development”
This unexpected market crash has not, according to Selva Ozelli, “shaken the faith of Turkish investors in cryptocurrencies”. These are considered to be a hedging asset against the devaluation of the lira and double-digit inflation.
The TRY/USD pair was very volatile during the fourth quarter of 2021, with significant declines seen during this period. This volatility could be explained by the fall in interest rates decided by Turkish President Recep Tayyip Erdoğan against the advice of the central bank, in a context of high inflation.
Selva Ozelli also lingered on a few lines on Turkey’s ongoing projects for the development of its digital currency. She echoes the words of Kahraman of Cointelegraph Turkey, who points out that “cashless payments already represent more than 50% of all transactions, according to the PwC 2020 Payments Study”.
The issuance of a central bank digital currency does not present, according to Kahraman, “a significant advantage for the citizens”. On the other hand, it has “obvious advantages for the Turkish government and financial institutions”.
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Cryptocurrency regulation in Turkey: legal void in a new finance not necessarily welcomed
Selva Ozelli still relies on Kahraman’s analyzes to draw contours of the cryptocurrency regulatory landscape in Turkey. The country would have “no clear regulator governing all developments related to cryptocurrencies”.
However, the authorities have taken major legal or regulatory measures on cryptocurrencies in 2021. The Turkish central bank had banned the use of cryptocurrencies as a means of payment in April 2021.
1er May 2021, Erdoğan adds via a presidential decree, cryptocurrency exchanges to a list of institutions operating within the framework of regulations on the fight against money laundering and the financing of terrorism.
The Turkish president had further indicated in December 2021 that “legislation concerning crypto-assets is ready for parliament”, but he has no “definitive date” for the moment.
Regarding the taxation of cryptocurrencies or non-fungible tokens (NFT)Turkey has no regulations on this subject.
Eren Can Ersoy and Ezgi Kartın of Kılınç Law & Consulting nevertheless explained that if cryptocurrencies are qualified as “securities”, the gains generated by the purchase and sale of cryptocurrencies in 2021 exceeding 19,000 lira “will generally be subject to income tax, but not value added tax (VAT). The same is true of commissions received by crypto exchanges.
If cryptocurrencies are considered as “commodities” or “goods”, the taxpayer who “is not engaged in a trade or business” will have to pay income tax for earnings over 43,000 lira in 2021.
“If the taxpayer is engaged in a trade or business”, the profit will correspond to a commercial gain, and “cryptocurrencies will be subject to income tax as well as VAT”.
The nature of the upcoming cryptocurrency regulations in Turkey remains one of the most important factors in the development or regression of new finance in the country. Will a major event in 2022 change the position of the Turkish authorities who ardently wish to wage war on bitcoin?
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