Billionaire investor Ray Dalio’s fear of governments outlawing bitcoin to preserve their monopoly over currencies has come partly true in Turkey.
The currency crisis-riddled country announced a ban on cryptocurrencies as a means of payment early Friday, souring the mood in the bitcoin market. The ban is to take effect April 30.
“It is considered that their use [crypto assets] in payments may cause non-recoverable losses for the parties to the transactions due to the above-listed factors, and they include elements that may undermine the confidence in methods and instruments used currently in payments,” the Central Bank of the Republic of Turkey said in a press release titled the “Regulation on the Disuse of Crypto Assets in Payments.”
Bitcoin has come under pressure in the past few hours, falling from $63,000 to $60,700 to trade 3% lower on a 24-hour basis. The weakness is almost certainly due to Turkey’s decision as it could set a bad precedent for other crisis-riddled countries struggling to protect their currencies. Morocco has already enacted such a ban and India is expected to introduce one shortly.
Dalio warned of coming government curbs last month. “Every country treasures its monopoly on controlling the supply and demand. They don’t want other monies to be operating or competing, because things can get out of control,” the founder of Bridgewater Associates, the world’s largest hedge fund, told Yahoo Finance.
Cryptocurrency proponents have long argued that bitcoin is a better means of payment than gold or fiat currencies because its supply is cut by half every four years via a programmed code known as mining reward halving. That puts bitcoin’s monetary policy in stark contrast to inflationary policies adopted by the Federal Reserve and other central banks.
Citizens of countries facing high inflation and fiat currency crises, such as Turkey, have turned to bitcoin in the past few years, raising hopes of widespread adoption across the globe. Turkey’s inflation topped 16% last week, and its currency, the lira, has depreciated by 10% this year, having dropped by 24% in 2020. The country sold almost 11.7 million tons of gold in February, as reported by Arab News.
Readers should note that Turkey’s latest ban does not stop Turkish citizens from trading cryptocurrencies. They can still buy bitcoin as a hedge against inflation. However, exchanges could face some complications due to the payments ban.
“Local exchanges and some global ones are using regulated payment providers like Papara and Ininal to deposit/withdraw Turkish lira,” Onur Gözüpek, cryptocurrency consultant at crypto exchange BtcTurk Pro, told CoinDesk in an email. “After April 30, these providers will not be able to send/receive payments between cryptocurrency exchanges.”
“Users will still be able to deposit/withdraw Turkish lira through banks in Turkey. Trading will not be affected,” Gözüpek added.