Turkish gov't eyeing crypto assets, requests user data from local exchange platforms

K. Murat Yıldız / Duvar English 

In early March, a press release from Turkey’s Treasury and Finance Ministry stated that it shares "global concerns" about cryptocurrencies and that the ministry and other related institutions, such as the Central Bank of the Republic of Turkey (CBRT), the Banking Regulation and Supervision Agency (BDDK), and the Capital Market Board, are closely monitoring developments (SPK).

The September-announced New Economy Program (YEP) includes tax arrangements in the "acquisition, purchase, selling, and transition" of crypto financial properties, according to the Official Gazette.

According to reports, the ministry requested user details from crypto-currency exchanges based in Turkey, including identification numbers, names, registration times, and, most notably, the sum of money in crypto investors' accounts.

On April 1, the Treasury and Finance Ministry issued a statement on Twitter, Facebook, and their official website in response to rumors and speculation on social media.

“Today, some news and comments about crypto assets regarding our Ministry have appeared on some websites and social media channels. It was deemed necessary to give an explanation regarding the news in question. In today's world, financial intelligence units (FIU) in many countries are struggling with money laundering and financing of terrorism.

In our country, this struggle is mainly carried out by the Financial Crimes Investigation Board (MASAK) within our ministry. MASAK develops implementation strategies, ensures coordination between relevant institutions and organizations, and exchanges views and information in order to perform the aforementioned functions. MASAK conducts studies in many financial fields.

In this sense, although crypto assets, which have been on the agenda in recent years, provide some convenience to their users due to their features, can also be used extensively in activities of money laundering and terrorism financing, especially due to their anonymous structure.

Within the framework of MASAK's duties and powers and within the scope of combating said crimes, information can be requested from market actors operating in this field, such as crypto-asset trading platforms. The work done is also included in the mentioned duties and responsibilities of MASAK.

It is announced to the public with respect,” the statement read.

Ministry statement didn’t convince experts and investors

Many analysts and investors saw the development as a step forward in taxing cryptocurrencies in order to locate new revenue for the struggling Turkish economy and treasury, despite the ministry's argument that the move regarding crypto assets was about "money laundering and financing of terrorism."

“The government is testing the waters. Even if we accept their actions and statements regarding money laundering and terror financing, authorities should know that big Turkish monetary players are not on local exchange platforms. The information they gather will be limited to small local players,” an insider from the Turkish cryptocurrency scene told Duvar English under the condition of anonymity.

Local exchange platforms fear exodus

Senior Researcher A. Selim Sesli from Turkish exchange platform Bitexen told Duvar English that the company has already taken globally accepted measures to prevent money laundering and other illegal transactions and they would support the government's decision on crypto-asset taxation, but that "the decisions to be taken should not direct our people to foreign companies or lead to an illegal economic order."

Although the insider argued that the government would not be able to track down and tax big players, tax lawyer Turgut Candan believes that the government is aiming at major cryptocurrency investors.

“New laws and regulations, which will be shaped by the state's need for money and its ability to tax these revenues, could answer all of the existing questions. However, I assume that when this occurs, their primary focus will be on large investors rather than small ones,” Candan stated.

Turks seek shelter in crypto assets

As Turkey's inflation rate hit 16 percent one month ago, according to official statistics, and the Turkish lira saw new lows, Turkish investors' appetite for fast gains and inflation security through cryptocurrency investments has risen.

Trading volumes of crypto assets in Turkey starting in February until March 24 hit 218 billion Turkish liras (27 billion dollars) according to data provided by U.S. research company Chainalysis, surging from over 7 billion liras in the same period the year before. According to the same source, after President Recep Tayyip Erdoğan removed Central Bank Governor Naci Ağbal, Turks flocked to cryptocurrency markets.

Just one of the local cryptocurrency exchange sites, BtcTurk, reportedly attracted over a million new users in the first three months of 2021.

According to Reuters data, crypto assets worth 23 billion liras were traded between March 20 and 24, compared to 1 billion liras in the same period last year.

Furthermore, according to a study conducted by the World Economic Forum, among the 74 largest economies in the world regarding countries that use the most cryptocurrencies in relation to their population, Turkey ranked fourth globally and first in Europe with 16 percent.

Government can only access limited data

“Globally players keep their money in major international platforms. Why would major Turkish players keep theirs in local ones?” the insider asked, adding that “the information the government will obtain will be limited to small cryptocurrency investors who aim to make a quick buck.”

“Big Turkish players’ money is not online. Traditionally, they don't keep their money in the bank, but at home. You can only trace them when they take some of that money from their homes to the bank. Even then you can only trace their transaction and the amount of money they used for that specific transaction. They can never know how much crypto assets they really have,” he pointed out.

Experts say there are various ways to circumvent government oversight of cryptocurrencies both online and offline.

Echoing experts, the insider pointed out that, “If you don’t want to be traced you can just simply go to the old bazaar and trade your bitcoins there.”