Turkey’s inflation rate is set to top 80% for the month of October and could go as high as 87%, according to estimates. Consumer prices have jumped to a 24-year high of 83%, with the domestic producer price index touching a mammoth 151.5% year on year. Turkey’s inflation rate, almost 10 times that of the global average for 2022, is the sixth-worst in the world.
Last week, the Turkish lira hit an all-time low against the U.S. dollar, having lost around two-and-a-half times its value since the start of 2021. Amid soaring prices, a turbulent lira, and multi-pronged fiscal predicaments, locals have found an economic lifeline: cryptocurrency.
Local crypto trade surged over the million-per-day mark in December according to Reuters. According to Turkey-based Paribu, there are over 8 million crypto users in the country, which is around 10 percent of the overall population. Another study published last month by CryptoManiaks, noted that Turkey has the second highest number of cryptocurrency-related Google searches per capita with an average of 5,465 monthly searches per 100,000 people, second only to the Netherlands..
“People in Turkey are looking for an opportunity in cryptocurrencies during the economic crisis. Although the prices of cryptocurrencies have decreased, it cannot be said that we have seen the same decrease in interest,” Uzmancoin co-founder Ceylan Arslan tells the Daily Dot.
Turkey President Recep Tayyip Erdoğan, who has overseen the country’s worst economic crisis in the two decades he has helmed the government, has been playing coy with cryptocurrency, aiming to strike a balance between his autocratic politics and the masses’ need for financial reprieve.
While traditionally Turkey’s crypto usage, like other parts of the world, would decrease at the same rate as the price reduction, today the decrease is nowhere near as pronounced, said Arslan.
The Daily Dot spoke to numerous cryptocurrency users in Turkey to understand how cryptocurrency has become a lifeline keeping many financially afloat. Many users are a part of the country’s growing tech-savvy generation, remotely providing IT services to overseas markets in a bid to navigate the economic crisis at home. Earning in American dollars by providing freelance services helps many locals maintain an earning that grows with the price hikes at home. However, a need to further secure payments received has encouraged many to opt for cryptocurrency.
“We need a decentralized currency that is not impacted by the government’s ideological or populist economic policies. Our hard-earned savings cannot be held hostage to [Erdoğan’s] politics,” said Izmir-based digital marketing professional Meryem Demir, who began investing in crypto in 2020.
Indeed, a common need among many traders, especially those that started off using crypto over the past two years, was to secure their savings in light of a fast-plunging lira eating into the worth of their holdings, even if it meant risking it in a crypto market increasingly betraying volatility of its own.
Since January 2021, as the lira has lost more than 150 percent of its value, Bitcoin, for instance, has lost only 33 percent. And while cryptocurrency has fast declined in 2022, its cumulative worth still outdoes that of the local currency for the Turks, in addition to offering potential growth in the future that the lira doesn’t.
“This is a typical investing pattern in countries where inflation reaches unprecedented levels. Since the inflation in Turkey rose to unimaginable levels in the last two years, taking more risks than usual has become a pattern to offset the loss of purchasing power,” said Burak Tamaç, a researcher at CryptoQuant, while talking to the Daily Dot.
The declining values are only a part of the challenge that Turkish people face when it comes to cryptocurrency. The increasingly autocratic government, and its unhinged economic policies, pose a major concern.
At last month’s Blockchain Istanbul Programme organized by the ruling Justice and Development Party (AKP), President Erdoğan urged youngsters to pursue blockchain technology. Many perceived this as an about-face by Erdoğan, whose government hasn’t exactly been welcoming towards crypto in recent years.
Last year, the AKP government banned cryptocurrency for payments. It has also been seeking to rush legislation to restrict cryptocurrency usage in the country, ostensibly to protect the already plummeting lira. Activists fear Turkey could usher in heavily centralized regulations for crypto, such as in Egypt and Indonesia, shrouded by a combination of central bank dictations and restrictions via Islamic law.
“The government has been contemplating a regulation for a while. They aim to tax on-ramping since it is the easiest way, but it has yet to be finalized,” said Tamaç. This would add taxes on transactions where crypto is purchased using local currency.
As things stand, trading cryptocurrencies, or investing in them, is not illegal in Turkey. But its usage as money, to sell goods and services, is banned. And where many see further progress on the crypto front owing to Erdoğan’s recent remarks, others see political motivations behind the Turkish president’s seeming support for crypto and the delaying of the government’s restrictive laws.
“There will be an election in Turkey next year. I believe the government will wait until after the election for comprehensive regulation,” said Tamaç.
Observers feel next year’s presidential elections will be closely contested, with AKP potentially being the latest in a growing list of ruling parties around the globe to face the electoral backlash of recent crises. While the COVID-19 pandemic and the war in Ukraine have hit the entire world, AKP’s own economic policies have been a significant contributor to Turkey’s worsening economic crisis.
Erdoğan’s Islamonomics, or meddling with interest rates in defiance of economic fundamentals, has been a contributor to the country’s fiscal predicament, which has in turn contributed toward a push for locals to seek unconventional avenues to protect their wealth.
Allowing crypto to flourish will provide much-needed breathing space to the Turks struggling to maintain their savings, which in turn can help the AKP avoid the electoral backlash against its fiscal policies.
The Turkish president’s slight turn may be about not wanting to alienate the significant vote bank that crypto traders are, constituting nearly a tenth of the country’s population in active users, in addition to their family members and friends. However, many fear the AKP might rekindle its Islamic rationale for its regressive economic policies, including a clampdown on crypto trading in the garb of curtailing “gambling,” immediately after they win.
Even Erdoğan’s remarks in support of blockchain tech at Istanbul University were accompanied by a warning for youngsters to “stay away from gambling.” Last month, Turkish authorities seized $40 million worth of cryptocurrencies, and detained 46 people, in a crackdown on betting across eight provinces.
“Opening casinos in Turkey was banned in 1998. Those who open casinos are subject to prison sentences. Online gambling was banned in 2006 by this government. Therefore, there is a strict ban on gambling,” said Ceylan Arslan.
The ban on gambling is also rooted in Islamic theology similar to interest rates, which the Turkish central bank has slashed for three successive months despite the escalating inflation. Turkey’s top religious body, Diyanet, has previously said Bitcoin is haraam, or forbidden, as per Islamic code, echoing many similar Islamic fatwas. Turkey’s central bank has already announced that it would launch a “state-backed” digital currency next year.
But should Erdoğan cling to power after the 2023 elections, the Turkish people’s struggle for decentralization and freedom is likely to resurface in the blockchain realm, despite his public support of it.
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