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In Turkey, Bitcoin Thrives while Going Deeper Underground

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The Lira is falling, PayPal has left, and the government blocks more and more websites; there are few countries in the world which need Bitcoin as much as Turkey. After the biggest exchange of the country stopped operation, Bitcoin trading has become chaotic but stabilizes on more decentralized markets.

Bitcoin is a growing business in Turkey. A turkish Bitcoiner who does not want to be named told BTCManager:

“There is a huge bitcoin community. These guys are young and mostly with IT background. They are following the world, and they trade Bitcoin. Bitcoin is used for primarily investment or trading purposes as well as for purchasing items or games.”

BTCManager was in contact with several members of the Turkish Bitcoin community. But none of them wanted to be named in an article that has some political content. Unfortunately, it seems impossible to write about Bitcoin and Turkey without talking about the very specific, somehow tragic, political developments in this beautiful country of 75 million people, on the border of Europe and Asia, between Greece and Iraq, secularism and Islamism.

But let us start with the community and the industry. The most important company was BTCTurk, the only real-time exchange of Turkey with more than 70,000 users. Turkish Bitcoin blog Coin-Turk.com published in mid-2016 an overview on the Turkish Bitcoin exchanges. ”BTCTurk, the first Bitcoin exchange to trade using Turkish Lira, was established in Cyprus in 2013. Then Takascoin and Koinim exchanges were set up in Turkey.“ At this time, Takascoin had to close, for financial and tax reasons. The trade volume of BTCTurk was 500 to 700 bitcoin a day, for Koinim there is no data.

So, Bitcoin was already big in Turkey, when in mid-2016 an event happened, that put the cryptocurrency in the spotlight of international attention.

PayPal Fails, Bitcoin Shines

With the beginning of June, PayPal had to leave Turkey.  “We are sorry to announce that PayPal is suspending its business operations in Turkey,” the online payment processor noted. PayPal lost its license for payments after Turkey enforced a new set of regulations, “that require PayPal to localize our information technology systems in Turkey fully.” If you run an internet business in Turkey, your server has to be within physical reach of the government.

Shortly after this, the VPN-provider PrivateInternetAccess invited people from Turkey to use Bitcoin: “Now that PayPal has left Turkey, Turks should use Bitcoin.“ For Turks, the access to a Virtual Private Network (VPN) is not just a measure to protect privacy, but a necessity to use the internet freely. The government blocks tens of thousands of websites, for example, Facebook, YouTube, WhatsApp, DropBox and even Tor. With every terror attack, the list grows longer.

A VPN allows you to undergo Internet blockades by using an encrypted tunnel to access websites with an IP of another country. After the shutdown of PayPal in Turkey, bitcoin remains the most convenient option to purchase the services of foreign providers of VPN and other online services. If you play it up, you could say that bitcoin have become a condition for Turks to browse the Internet freely. The VPN-provider PrivateInternetAccess takes the incident to promote bitcoin in general, “Cryptocurrencies such as bitcoin are incredibly useful at least as a medium of exchange between the fiat currencies of two countries ... Government action such as Turkey’s always accelerates the timeline of bitcoin adoption, though.“

BitPay, the world’s biggest Bitcoin payment provider, confirms that bitcoin has become more important in Turkey after PayPal’s exit:

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“In a particularly striking example, Turkey recently blocked merchants and customers from using PayPal in Turkey… this led to a dramatic increase in advertisers and affiliates paying and receiving bitcoin, which has now become one of the most effective ways to pay online in Turkey. By accepting bitcoin and paying out with bitcoin, affiliate networks are finding ways to directly, securely, and cheaply reach markets like Turkey's.”

Situation Worsens, BTCTurk Shuts Down

Some month after PayPal’s shutdown the general situation in Turkey became worse. President Recep Tayyip Erdoğan demonstrated a preference for authoritarianism for some time, but after the failed military coup in mid-July he transformed the country more and more into something that many observers think is closer to a dictatorship than to democracy. Immediately after the failed coup, the government declared a state of emergency, issued travel bans for many people, discussed the reintroduction of death punishment and started a purge in the military and political class. Only one month after the coup more than 35,000 people have been arrested.

Following the coup, BTCTurk had to tell its 78,000 clients that it had to halt its operations. The reason was not regulation, since bitcoin is more or less unregulated in Turkey. Turkish Bitcoiners do not expect that the country will regulate cryptocurrencies in the near future, but that it will follow the regulation of the EU in the long term.

BTCTurk did not violate any law or rule. “Our company has shown the highest possible sensitivity to legal compliance and has never allowed anonymous transactions. BTCTurk has shared all the information requested by itself in numerous inquiries with the security units,“ the exchange wrote in its last announcement. The problem was that the banking partner got cold feet. “Our relationship with the bank has always been problematic due to various reasons. Unfortunately, the last bank account that our company can keep open is closed today.“

While BTCTurk cannot continue to spread the money for the unbanked because it has become bankless itself, bitcoin has become more and more important in Turkey, as the situation in the country turned from bad to worse. President Erdogan started a witch hunt on members and pupils of the Gülen-movement, the Internet controls were tightened, the interval between terror attacks became shorter, and the conventional money of Turkey, the Turkish Lira, started to fail. Due to the frosty political outlook the tourism, in many maritime areas the most important industry, collapsed; with the beginning of the third quarter the economy started to shrink, and the Lira lost nearly 20 percent of its value in a few month, reaching an all-time low in early January. Like in many other countries of the world, bitcoin became a value stable alternative, while the conventional money broke down.

At the same time, however, the trading of bitcoin became harder, as the biggest exchange BTCTurk has stopped its operations. But according to insiders, the “market is somehow active in Turkey. The Over the Counter market is booming.“

A glance at the weekly charts of LocalBitcoins confirms this; volume exploded in August 2016, the month BTCTurk had to stop operating, and has grown more than tenfold since then, reaching around $100,000 a week.

Bitcoin Trading, Decentralized

A new platform to trade Bitcoin is BitKapital. This company, also located in the free zone of Northern Cyprus, offers investment products in cryptocurrencies with its platform Cryptomerian. Companies, ICOs, Cloud-Mining, Margin Trading and many more things which might be attractive to the people of Turkey suffering from high inflation.

At the same time, BitKapital operates a gateway for bitcoin trading, somehow on the Bitshares platform. “Since the sole operative bitcoin exchange of Turkey was shut down, thousands of cryptocurrency enthusiasts have been in chaos,” BitKapital announces, “many of them were scammed by opportunists; many fell with exorbitant fees of the local traders; others paid international remittance fees to send their funds to international exchanges. Thus, our gateway solution will address the essential need of using Turkish Lira to buy cryptocurrencies.“

While BTCTurk still struggles to have a banking partner to operate its real-time exchange, bitcoin trading in Turkey seems to move at a lower pace on more decentralized markets. And while the economy of Turkey is still shrinking and the government still tightens internet controls, the price of bitcoin did reach its all-time high in Lira as early as November 2016. It seems that few countries in the world that need bitcoin as much as Turkey, however, the Bitcoin infrastructure remains thin.