- Turkey has announced a ban of cryptocurrency use in the country
- Crypto use has surged following three years of inflation
- The cryptocurrency markets lost $56 billion following a flash crash
The cryptocurrency market suffered a $56 billion flash crash today as Turkey responded to a growing currency crisis by banning the digital currencies to which its citizens have been turning in droves. Crypto use in the country had been surging as individuals flee the rapidly devaluing Turkish lira for Bitcoin and other more stable crypto assets, but that lifeline has been taken away as the central bank effectively banned the use of cryptocurrencies in the country.
Turks Turn to Crypto to Fight Inflation
Turkey has been suffering a currency crisis since 2018, with President Recep Tayyip Erdoğan going through four central bank governors in less than two years, firing the latest this week. The latest firing inflamed an already bad situation, with inflation reaching a six-month high in March of 16.19%, while unemployment in the country remains high, at 13.4%.
Unsurprisingly, Turkish citizens had turned to cryptocurrencies as a shelter against this rapid devaluation of their sovereign currency, with usage spiking again following the removal of the latest central bank governor. The Turkish government has stepped in however and banned businesses from transaction in digital currencies, with the ban taking effect from April 30.
Citizens Forced to Use Lira
According to the new regulations, crypto assets will not be able to be used directly or indirectly for payments and payment service providers will not be allowed to develop business models in a way that utilize crypto assets. The act of forcing citizens to use the country’s devaluing fiat currency and prohibiting them from increasing their wealth, or at least trying to stay afloat by using an alternative currency, is a perfect example of why Bitcoin was created in the first place.
In banning the use of cryptocurrencies, the Turkish government has demonstrated its fear of the new paradigm, and, as history has shown, when a failing government takes radical steps to try and claw back power it rarely ends well.