There is a palpable crypto fever in Istanbul. Within walking distance of the Grand Bazaar are several businesses where you can exchange cash for bitcoin (BTC) or tether (USDT). According to the Turkish crypto exchange Paribu 2022 report, there are at least 8 million crypto users in Turkey. Just last week, President Recep Tayyip Erdoan touted the advantages of blockchain technology while encouraging young people to avoid cryptocurrency gaming. Additionally, he stated that Turkey desired to be a creator, not a consumer, of digital assets.
Turkey is not immune to the global crypto market decline. According to a study by Paribu in 2022, the exchange’s daily transaction volume will decrease to $145 million from $850 million in 2021. However, local interest remains robust. The Turkish crypto community is campaigning for Istanbul to host Devcon, Ethereum’s largest developer conference.
Numerous mainstream media headlines have described cryptocurrency as a haven from Turkey’s sky-high inflation and sharp lira devaluation. But the collapsing lira does not entirely explain the local attractiveness of cryptocurrencies. In Turkey, cryptocurrency signifies independence from the national currency, government economic policies, and even business life.
Vidal Arditi, the founder of Layka DAO and Lunapark Web3 Hub based in Istanbul, said that crypto was a saviour for many individuals here, both from a financial perspective and a mental perspective.
A crypto exchange in Istanbul, Turkey. Image: AFP
The inflation rate in Turkey has hit 83%, a 24-year high; however, other analysts estimate that the rate is substantially higher. In addition, the lira set a record low versus the U.S. dollar due to the government’s unconventional policy of slashing interest rates. Critics blame inflation on the government’s monetary policy, while the government blames “foreign financial tools.”
The inflation rate in Turkey has hit 83%. Image:
The founder of Istanbul Blockchain Women, ala Gül enkardeş, stated that many did not believe in the strength of the Turkish currency. Thus they sought investment possibilities to preserve the value of their money.
Inflation can make it difficult, if not impossible, to accumulate money, an issue exacerbated by an absence of viable investment alternatives. Generation Y and the next generation had limited options to invest in companies such as Google, Tesla, and Facebook, according to Mindstone Blockchain Labs CEO Tansel Kaya.
Frequently, salaries do not keep pace with inflation, resulting in declining purchasing power. In July, Turkey increased its minimum wage for the second time in six months, by 30%, to 5,500 lira, or $340. Currently, it is less than $300.
Those who worked for global corporations concurred that salaries in Turkey were comparatively low. One former Apple employee eventually entered the crypto industry after leaving the company, partly due to the inadequacy of the wage to offset the devaluation of the lira and the decline in purchasing power for Turkish employees.
Working in cryptography was the more attractive alternative. Employee benefits and bonuses improved steadily for comparable employment in crypto-related organisations. “I realised this when I met a friend at a cryptocurrency exchange and was given a job,” the person explained. The ability to earn a wage in a different currency, such as USDT, USDC, or DAI, becomes a lifesaver for many people.
People in Turkey are suffering a great wage gap. Image: Reuters
Frustrated by the economic realities, some young people attempt to leave Turkey in search of a better life elsewhere. However, crypto can serve as a virtual passport for people who cannot or do not wish to leave their country.
“The good thing about working in Web3 is that you can get out of the country without getting out of the country,” Kaya of Mindstone Blockchain Labs said. The government may wish to avoid alienating millions of crypto users, some of whom view crypto as a lifeline.
The decentralised structure of crypto provides a gateway to worldwide investors for company founders. Levent Cem Aydan, the founder of Seedify, stated that it might be difficult for businesses to raise large sums of money from Turkish venture capitalists and that raising funds abroad is also not straightforward. For instance, visa restrictions and travel expenses might make it difficult for Turkish innovators to visit Silicon Valley.
In contrast, Web3 projects may be able to collect funding via an initial DEX offering (IDO) via a decentralised crypto exchange or non-fungible tokens, according to him.
It may be surprising that Turkey is reasonably tolerant of cryptocurrencies, which are viewed as a threat to state authority by several nations. In 2021, Turkey rated 103 out of 167 countries on the Economist Intelligence Unit’s barometer of democracy. This month, the Turkish Parliament passed legislation criminalising the dissemination of so-called disinformation, causing anxiety among proponents of free expression. Despite this, however, crypto remains relatively inexpensive.
Turkey’s central bank prohibited cryptocurrencies as a form of payment in 2017, likely in response to the lira’s decline. Otherwise, crypto remains uncontrolled for the most part. Even though initial coin offers (ICO) have been restricted worldwide, Turks can still engage in them.
A plausible explanation for this absence of legislation is that the Turkish government has not yet gotten to it. Cryptocurrency moves more quickly than the ability of governments to control it. The Turkish government has not cracked down on crypto because it understands its importance to many people.
There are indications that Turkish politicians are anxious about angering cryptocurrency enthusiasts. A grassroots effort impeded the approval of a controversial crypto bill in 2017. The draft legislation published on social media sought to restrict foreign trade in Turkey and prohibit self-custody wallets. Anger flared online, and the Parliament scheduled a meeting to discuss the law. Many individuals in the crypto community expressed their worries, which appeared to have contributed to the bill’s delay.
Why would the Turkish government care about the opinions of crypto users? The impending presidential election in 2020 could be the toughest re-election for the ruling party. In an election where every vote is crucial, the government may not want to risk alienating millions of crypto users, some of whom consider bitcoin a lifeline.