For the Ruined, Turkey’s Cryptocurrency Crackdown Comes Too Late | Business and economic news
Istanbul, Turkey – Hulya Ozkal thought she was investing wisely when she invested her savings in Bitcoin.
“It might not have been millions, but I saved half a Bitcoin for the future,” the 65-year-old retiree told Al Jazeera.
In most cases, this bet would largely pay off this year. A Bitcoin was worth just over $ 29,000 at the 2021 open, according to Coinbase, peaking at nearly $ 65,000 last month before returning some of those gains to currently trade above $ 55,000.
Meanwhile, the Turkish lira has fallen more than 10% in value against the US dollar since the start of January.
Ozkal, who runs a beauty salon and other businesses, said his crypto holdings are worth around 279,000 lira (around $ 33,600). But she fears those assets will be lost forever.
She is among hundreds of thousands of hapless investors who held accounts with Thodex – a local crypto exchange that abruptly halted trading last month, sparking an investigation, a wave of arrests and an international manhunt for the CEO of Thodex, who allegedly fled to Albania. with $ 2 billion owned by some 400,000 customers.
“I thought about burning everything and killing myself,” Ozkal said. “I closed my business, I sold my house. Now I am in debt.
I thought of burning it all down and killing myself
Thodex isn’t the only uplifting tale that has shaken Turks’ confidence in investing in cryptocurrencies as a hedge against a weakening lira and double-digit inflation. Two days after Thodex went offline, another local crypto exchange, Vebitcoin, announced the halt in operations due to financial strains.
Financial watchdogs in Turkey only started tightening their grip on the loosely regulated crypto industry last month.
On Friday, a decree announced in mid-April went into effect banning cryptocurrencies for payments. The next day, a presidential ordinance added crypto exchanges to the list of companies subject to anti-money laundering and anti-terrorist financing rules.
But for many, this government intervention came too late, leaving many perplexed as to where they can safely protect their savings.
From embrace to bust
Prior to the collapse of Thodex and Vebitcoin, and the tightening of the regulatory stranglehold, Turkey was grappling with cryptomania, boosted by an annual inflation rate that climbed to 17.14% in April – its strongest peak in almost two years – and the lira’s loss of half its value against the dollar over the past three years.
President Recep Tayyip Erdogan sacked three central bank chiefs in two years, and the government called on Turks to sell their savings in foreign currency and deposit gold in banks to support the lira.
Meanwhile, crypto came under lax oversight and taxation, prompting legions of Turks to protect their capital in ‘kripto para’ – crypto currency – rather than sit idly by and watch their savings in pounds erode.
A World Economic Forum survey released in February found that 16% of Turks said they used or had a cryptocurrency-level peg with Peru which, along with Turkey, ranked fourth in the world after the Nigeria, Vietnam, and the Philippines, where foreign currencies are used for overseas remittances.
Now, many Turks have seen their crypto economies wiped out by the exchange scandals.
Interpol has issued a red notice for the attention of fugitive Thodex CEO Faruk Fatih Ozer, and more than 80 people were arrested last week in an investigation into the fraud in the exchange. Six people, including Ozer’s brother and sister, are currently in jail awaiting trial.
Most of the victims are students, low-income civil servants and workers
Meanwhile, four people have been arrested after Vebitcoin – which had some 200,000 customers – stopped trading on April 23.
In both cases, the Financial Crimes Investigation Board of Turkey blocked the platforms’ onshore bank accounts. But thousands of victims of the exchanges are in shock.
Oguz Evren Kilic is a lawyer who represents clients of Thodex. He told Al Jazeera that while Thodex’s deposits ranged from $ 50 to over millions of dollars, the collapse of the exchange has wreaked financial havoc primarily on low- and middle-income investors.
“Most of the victims are students, low-income civil servants and workers,” said Kilic, who heads the Ankara Bar Association’s Capital Markets and Financial Law Commission. “The crypto market is their only escape from the economic and social crisis in Turkey.”
“They don’t know anything about cryptocurrency and its technology, economy and politics,” he added. “They just want to make money in the market for their daily goods, their rent, etc.
One customer, a 30-year-old saleswoman who asked Al Jazeera to remember her name, said she lost all of her Lira 7,000 ($ 840) savings when Thodex was offline.
“My loss was not much compared to the other victims, but I still felt cheated,” she said. “I signed up for Thodex in 2018 and it was different back then. I made an investment and transferred my savings to it. “
Cyber law specialist Kursat Ergun also represents the victims of Thodex. “I’m afraid we’ve been watching the news of people who recently committed suicide because of this incident,” he told Al Jazeera. “There are those who risked all of their financial assets in this situation,” he said, adding that some had even taken out loans to invest in cryptocurrencies.
The infidels and the faithful
For some victims of Thodex, their days of investing in crypto are over.
“I will never use cryptocurrencies again,” said the store employee who lost her savings on Thodex. “I don’t trust any of them and they are unreliable. In the future, I will keep my Turkish Lira money at home.
But although some have turned their backs on cryptocurrencies, Kilic believes Turkey’s love for risk taking and the raffle of supposedly easy profits will continue to overshadow many people’s reserves.
I will never use cryptocurrencies again,
“The crypto market is a casino for Turks,” he said.
While he believes the regulatory framework has been slow to arrive, he believes increased scrutiny will continue to make crypto an attractive cover against the Turkish Lira’s struggles and economic uncertainty surrounding the COVID-19 pandemic.
“Turkish working and middle classes are looking for exit plans or contingency plans to survive,” Kilic said.
Meanwhile, hundreds of thousands of Turks sit around gazing at the ruins of their savings and retirement plans, wondering if they will ever recover.
“I was going to buy a house, a small car, it was my dream retirement,” said Ozkal. “Now I live in dire straits. Better to die.