More Turkey, Please!!
Headline: What is Turkey doing to adapt to cryptocurrency?
Body: OK, Thanksgiving is over, but, let’s continue to talk Turkey. Specifically, Turkey and their attitude toward cryptocurrency. This is an interesting situation because of the interplay between different levels of the populace. The government is responding in one way, the population is responding, and then, within the general population, there is a core that is truly interested in cryptocurrency.
The Government—generally
The first thing to understand here is that the government’s response has been schizophrenic. On one hand, they want to encourage any type of business activity, even involving cryptocurrency. The leader of the nation has publicly extolled the virtues of blockchain technologies. On the other hand, the leader of the country has repeatedly warned the young people of the nation of the casino they walk into in any cryptocurrency transaction. At the same time, the leadership has made it illegal to use cryptocurrency as payment for goods and services. Please remember that this leadership is leading a very young nation, where the average age of an adult is 32 years old. The leadership is exquisitely aware of this, and unlikely to take more substantive actions against cryptocurrency until the election is over.
The population—generally.
The fiat currency of Turkey is the Lira. Due to decisions of the central government, it is a quickly inflating currency, and this leads to a consequent drop in value. This has been going on for a long time and sometimes goes to a rate of 80% per year. Second, please consider the geographical position of Turkey. It is trapped directly between Europe and Asia, an caravans have been transiting it for centuries. So, the populace has become quite comfortable with many different types of alternative investments.
Against this backdrop of history and economics, the population is reacting reasonably to cryptocurrency. Over 50% of the adult population has some investment in cryptocurrency, usually in Bitcoin or Ethereum. But, when researchers began to dig into why the population, an interesting attribute became visible. They were not investing because the people were so hopeful about capital appreciation. They were investing in the hopes of avoiding at least the worst aspects of a rapidly inflating fiat currency. Said another way, preservation of capital was their objective when they invested in cryptocurrency. There is a very clear summary of this pain,
In Istanbul, the pain is real and anecdotes abound. A restaurant’s menu prices increase frequently. Rent jumps five times from one year to the next. It is nearly impossible, I am told, for a local, white-collar worker to buy a house. Even the crypto roller coaster starts to look like a more sound investment strategy. At times the Turkish lira has, in fact, proved to be more volatile than bitcoin.
There is a small, vocal community that is very interested in cryptocurrency.
This band of individuals are doing everything they can to encourage the Ethereum Foundation to host their developer convention in Turkey.
The Verdict
All of this is interesting, but it kind of looks like the U.S. approach to cryptocurrency. What makes this interesting is that the government involved is not a democracy like we might be used to in the U.S. or Western Europe. In Turkey (yes, I know they re-named it Turkeye, but I didn’t want Word to have a seizure) they have something very close to a command economy and allocation of scarce resources does not follow the same model. Still, there seems to be a desire among the government to at least make the optics of the situation look virtuous to outside observers. For this reason, what happens within Turkey might form a model for cryptocurrency within other countries, or at least provide us qive us an idea of what not to do.
REFERENCES
Tales from the crypto: lira crisis fuels Bitcoin boom in Turkey | Business | The Guardian
‘Basically a Savior’: Why Crypto Is So Popular in Turkey (yahoo.com)
Editor’s Note: Please note that the information contained herein is meant only for general education: This should not be construed as Tax Advice. Personal attributes could make a material difference in the advice given, so, before taking action, please consult your tax advisor or CPA.