Turkey moved up a single place to 35 on the coincub Q3 2022 rankings purely on the re-evaluation of data without any significant crypto news coming from the country. Turkey has a highly advanced digital and blockchain community and its central bank is making positive attempts to create a central bank digital currency (CBDC) known as the digital lira. That said, the central bank also banned the use of cryptocurrency as a method of payment in an attempt to dampen demand from its enthusiastic population – a similar move to Russia in the latter half of last year. High-profile fraud cases and inflation, not to mention a new round of anti-money laundering legislation and compliance requirements yet without an overall regulatory policy on crypto points to a country continually playing catch-up with new developments.
Turkey’s government, however, has a love-hate relationship with crypto, and a draft Crypto Bill was mysteriously leaked. The proposals stated that the government was planning to place greater restrictions on investing and using cryptocurrencies (in order to protect the Turkish currency). These proposals were met with public outcry and since then things have come to an impasse.
Bitcoin and cryptocurrency trading in Turkey
Turkey has a buzzing crypto economy but as of this year, it is illegal to spend your crypto gains on goods or services. The formal reason is due to definitions – cryptocurrency is seen as a commodity, not a currency so it can’t be used as a payment – this is the official stand, but it’s also a great way of keeping the lid on the crypto economy whilst so much crypto confusion reigns.
Turkish Bitcoin trading and crypto law
Cryptocurrencies are not accepted as currencies in Turkey and as of this year, the country put in place legislation banning the use of cryptocurrency for the payment of goods and services – much the same as in Russia. This doesn’t mean that Turkey isn’t a burgeoning crypto economy though because it is – the population has taken crypto to heart and the purchase of cryptocurrency as an investment is perfectly legal. So you can save it but not spend it – at least not in Turkey – which makes it a hoarder’s dream. All the leading exchanges operate and there are plenty of ATMs to exchange your coins.
Turkish Bitcoin mining
Mining is legal in Turkey but as we all know, requires vast amounts of energy and huge computing power. In many countries the cost is prohibitive but when Bitcoin prices rise, so too does mining activity generally. In Turkey, there is no specific law that addresses cryptocurrency trading or mining. New tax laws applying to crypto taxation are sure to apply to mining so watch this space.
Bitcoin tax in Turkey
Turkey follows the pattern of so many countries with large populations that have adopted cryptocurrency so readily. Much activity is on a peer-to-peer basis and specific taxation policies tend to lag behind widespread adoption. As such, crypto trading has not been subject to specific taxation measures, but this is due to change imminently. Exchanges and crypto service providers fall within the standard tax for businesses of 20%, but a new tax policy surrounding the purchase and trading of crypto assets is underway.
In addition to standard income tax that may be applicable to your crypto income, there is also the possibility of Value Added Tax as trading may be deemed as a performance and sale of services. In this case, your liability could be 5% VAT on the revenue unless the monthly sales amount is within $1,300
The latest ban on crypto spending and the potential arrival of new tax laws means it’s difficult to see how using cryptocurrency for long-term investment plans is going to play out.
Turkey’s financial outlook on Bitcoin and the crypto economy
To a lesser or greater extent, all central banks around the world are attracted to the idea of a central bank digital currency. This is not quite the same as trading popular cryptocurrencies such as bitcoin, but a means to have a controlled coin for the facilitation of cashless transactions without massive price speculations. In line with this, Turkey’s central bank has an R&D project underway to explore the concept of digital money. Having a ban on the use of cryptocurrency for spending rather inhibits mainstream banks from exploring opportunities to provide wider services; they are allowed to facilitate the transfer of funds to and from cryptocurrency exchanges on behalf of their customers.
Turkey and Defi: the latest developments
As with all the countries dealing with cryptocurrency – even those that have banned it – Turkey is highly interested in the potential of blockchain technology. Turkey’s interest in blockchain is widespread and it could be said to be one of the countries at the forefront of exploring its potential. One initiative, the Blockchain Turkey Platform has the scope of creating a viable blockchain ecosystem throughout Turkey and helping the country take a lead in its development. Decentralized Finance, (Defi) at present is very much linked to cryptocurrency and, as with all countries, very much a topic of debate. Whether Defi, will replace the mainstream ebb and flow of financial systems is the biggest issue of all.