Authorities are considering the establishment of a central custodian bank for crypto exchanges to mitigate risk
Just days after announcing a ban on crypto payments in the country, Turkey’s financial regulators have been forced to also re-consider crypto market regulations as two local exchanges have crumbled in the last week.
The collapse of Thodex and Vebitcoin exchanges, that allegedly conducted exit scams, has led the government to consider establishing a central custodian bank for crypto exchanges that can work towards eliminating counterparty risk, Bloomberg reported.
A senior official from the administration revealed that authorities also want to set a capital threshold for crypto exchanges and mandate a certain level of educational qualification for executives at crypto firms.
The regulatory framework is a collaborative effort of the Treasury & Finance Ministry, Capital Markets Board, and financial crimes watchdog Masak, and will be completed in a few weeks, the official confirmed.
Popular crypto exchange Thodex’s CEO is said to have fled the country after the exchange suddenly stopped all activity this week. Thodex managed over $2 billion in cryptocurrencies and its collapse has sparked an investigation as part of which the local police have already detained over 60 people.
Vebitcoin, on the other hand, also caught officials’ attention after stopping all operations earlier this week, and four employees have been arrested in connection to a possible exit scam.
Turkey has witnessed a flourishing crypto market, especially since the pandemic and its subsequent economic crisis. This has been primarily attributed to the role of Bitcoin as a safe-haven asset in countries where the confidence in fiat money is low.
Turkey’s weak Lira and increasing inflation presented investors with an opportunity to make quick profits, driven by the rising demand for crypto in the country. Data from last month shows that Google searches for Bitcoin skyrocketed by 566% in the country as the Turkish Lira plummeted by 15%.
However, the increasing popularity of cryptocurrency was threatened by the volatility of crypto markets which led the government to ban the use of crypto for payments earlier this month. Despite this, Turkey’s interest in Bitcoin and other emerging cryptocurrencies continued to grow, especially in the light of the financial uncertainty in Turkey.
Nonetheless, whether Turkey’s preference for cryptocurrency to protect its funds will survive the current rise in crypto exit scams and the government’s authoritarian approach towards the crypto market remains to be seen.