Turks Turn To Crypto To Escape Lira

January 14, 2022 6:50 pm

Cryptocurrencies have had a reputation to be risky due to the volatile nature of many of the well known coins such as Bitcoin and Ethereum.

On the opposite spectrum, many Turks are actually moving towards crypto in favor of abandoning the local currency which is the Turkish lira.

The most favored crypto of the Turks is Tether right now which is a stable coin that is pegged to the dollar and transaction volume between the two was actually greater than transactions with the euro or the dollar.

The reason for this popularity of Tether and crypto may be due to the fact that Turks have always been used to economic uncertainty pertaining to their local currency which have prompted them to look for other ways to store wealth.

This continued surge in popularity occurred even with an official ban that which was introduced in the country which forbid them as a form of payment within the country.

Reaction to the ban was faced with negative criticism and was described as a terrible experience for the Turkish crypto community.

In recent years, there have also been fears of inflation which has led Turkish investors to seek crypto as a profitable investment and more importantly as a hedge against possible inflation.

Wall Street Journal reports:

In Turkey, part of the distrust extends beyond the lira. Two-thirds of Turkey’s banking deposits are foreign currencies, mostly dollars and euros. Turkish banks lend out some of those dollars to the central bank and the government, which has used them to intervene in foreign-exchange markets in an unsuccessful battle to prop up the lira.

If there was a rush to withdraw dollars, Turkish banks would need to get some of those dollars back to meet depositors’ needs, and there is some question whether the government could source the dollars. In a worst-case scenario, some fear the government could force banks to convert dollar deposits into lira.

That is pushing some to exchange bank-held dollars and cash dollars for what are known as stablecoins, cryptocurrencies whose value is pegged to traditional currencies such as the dollar, according to several Turkish savers. More than half the trades against the lira in December involved tether, Chainalysis said.

What is occurring in Turkey is not unique to the country.

Many other developing countries are experiencing the same situation where there is a high level of distrust of government economic policies by the general public.

Examples include Nigerians embracing bitcoins for payments over currency devaluations and El Salvador becoming the first nation to use bitcoin as legal tender.

So far, the government of Turkey has promised a new cryptocurrency that will be launched soon which could be approved by the country’s parliament, but there have been very few details on what that will entail and how soon it could be.

As many governments continue to print fiat currency at an alarming rate over the course of the pandemic, overall awareness of inflation has increased which has resulted in an overall increased attention to other safe havens of wealth with crypto being once of the popular options.

 

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