Crypto and NFTs meet regulation as Turkey takes on the digital future

In her monthly Expert Take column, Selva Ozelli, an international tax attorney and CPA, covers the intersection between emerging technologies and sustainability, and provides the latest developments around taxes, AML/CFT regulations and legal issues affecting crypto and blockchain.

Turkey — the cradle of civilization — is quietly digitizing despite its high-inflation economy, and the lira’s volatility might be correlated with the prices of Bitcoin (BTC) and Ether (ETH). During the fourth quarter of 2021, the TRY/USD exchange rate crashed from 9 to 18.5 liras per dollar in the six weeks leading up to mid-December before strengthening to as high as 10 liras and then falling back to 13.87 liras at the time of writing, rendering the currency a highly volatile asset.

The lira’s volatility stemmed from a contrarian interest rate cut made by Turkish President Recep Tayyip Erdoğan amid high inflation and against the advice of central bankers. High inflation tends to devalue cash and drive investors — including major professional and institutional investors alongside top hedge fund managers like George Soros — to invest their money in cryptocurrencies. With inflation soaring above 20%, Erhan Kahraman, news editor at Cointelegraph, told me that during 2021:

“Bitcoin and other cryptocurrency usage in Turkey increased elevenfold.”

Unexpectedly, the cryptocurrency market crashed during the first trading week of 2022, and as a result, Bitcoin and Ether — which rose 100% and 300% during 2021, respectively — entered bear market territory. The crash was blamed on a combination of three events.

The first event was the release of the minutes from the United States Federal Reserve’s December meeting. They hinted that the U.S. central bank would reduce its pandemic-era stimulus and begin raising interest rates sooner than expected. This news triggered a sell-off in the global stock markets that spilled over into the cryptocurrency markets, with Bitcoin’s price ultimately crashing over 40% from its all-time…


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