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Turkey bans cryptocurrency as payment for goods, services

A visual representation of digital cryptocurrencies, Bitcoin, Ripple, Ethernum, Dash, Monero and Litecoin is displayed on 16 February 2018 in Paris, France. [Illustration by Chesnot/Getty Images]
A visual representation of digital cryptocurrencies, Bitcoin, Ripple, Ethernum, Dash, Monero and Litecoin is displayed on 16 February 2018 in Paris, France. [Illustration by Chesnot/Getty Images]

Turkey's Central Bank has outlawed the use of cryptocurrencies as a payment method for the purchase of goods and services, joining the short list of countries to have directly banned them as cryptocurrencies gain significance in the global market.

In a statement issued yesterday, the Central Bank cited the reason for the ban as being due to ongoing security risks that the payment method poses to buyers and sellers. Cryptocurrencies and crypto assets, it said, are "neither subject to any regulation and supervision mechanisms nor a central regulatory authority."

That lack of regulation means that payment service providers (PSPs), such as PayPal or Google Pay, will not adequately "be able to develop business models in a way that crypto assets are used directly or indirectly in the provision of payment services and electronic money issuance."

According to the statement, the result of cryptocurrencies' security flaws is that "their use in payments may cause non-recoverable losses for the parties to the transactions…and include elements that may undermine the confidence in methods and instruments used currently in payments."

READ: France arrests 29 people over cryptocurrency financing of terror in Syria

The ban, which will come into effect on 30 April, comes as the cryptocurrency market within Turkey has grown significantly in recent months after investors sought to hedge against inflation and the deprecation of the Turkish lira.

The firing of the former Central Bank chief by Turkish President Recep Tayyip Erdogan last month particularly caused a huge spike in the trade of cryptocurrency within Turkey, with one billion liras worth of cryptocurrency having increased to 23 billion a few days after that incident.

Following the Central Bank's ban, however, Bitcoin fell by four per cent on the market, dropping from almost $64,000 to just over $60,500 this morning alone.

Governments and central banks that have previously banned the use of cryptocurrencies have often cited the same factors of security risks, lack of regulation, and the increased use of the crypto market by terrorist organisations.

Critics of such legislation, however, claim that governments and most established economic institutions are afraid of the potential of cryptocurrencies due to their unregulated nature, and therefore view them as a path to financial freedom.

READ: Turkey is leading the way in the fight against big tech dictatorship

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