While Turkey battles macroeconomic uncertainty, currency volatility and a failing financial system, three fintech startups prepare to help the country’s 16 million holders use their crypto.
Over the last decade, Turkey has been better known for her economic skittishness than her whirling dervishes or even her coffee. The domestic currency, the lira, has experienced serious volatility against the US dollar.
The failed coup d’état in July 2016 preceded a sharp fall in price. Matters came to a head again in August 2018 with the lira sinking to even lower lows.
As usual, it was the Turkish people who suffered the consequences. Some believed there was no other solution left but to “pray to God”. Many feared the worst and the lira plunged into free fall.
The people suffered in a perfect storm of poor US relations, an impending debt crisis, high inflation and low interest rates
Recession soon hit and the economic rug had been swept from under the country’s feet. Livelihoods were on the line, which led many to buy crypto to hedge against the plummeting domestic currency. The surge in crypto interest that followed in October was incredible and unprecedented. It was also the first sign of Bitcoin and some alts being used as a widespread store of value in Turkey. Soon after, ABN Amro released its outlook for Turkey in 2019. They predicted that the recession that had plagued the last two quarters of 2018 would continue. It did. In February 2019, inflation was up almost 20% year-on-year. The following month, the lira dropped 5% in a day and the stock market lost approx. 10% of its value in a week.
US trade deal
In May, however, Turkey returned to economic growth, and the lira began to temporarily stabilize. This was fueled by president Erdogan’s pre-election spending drive. The yield on 10-year local-currency bonds fell over 20 basis points. The benchmark Borsa Istanbul 100 Index also added 1.6%, bringing back some sanity to proceedings. There were temporary positive effects from the rumored trade proposal offered by U.S. envoy David Satterfield. Reports claim Washington sweetened the deal with trade deals and high-grade military equipment.
- U.S. F-35 warplanes
- Patriot missiles
- Reduced lower steel and aluminium tariffs
To seal the deal, the Turkish government were also required to fix the source of these strained Turkish-American relations. This meant promising not to activate the S-400 missiles they bought from Russia.Washington also supports Istanbul’s enemies, the Kurdish YPG, whom the Turks consider to be terrorists. The YPG’s links to the separatist PKK group mean that tensions remain high. Further macroeconomic instability ensued in early October. Trump upped the ante, making himself clear on what Turkey should do.
Many took this to mean a reference to disconnecting Turkey’s access to SWIFT if they did not play ball. This came in the wake of a similar threat made to Russia in 2014 following the annexation of Crimea.
Back then the Russians responded to this power play by creating an alternative network for remitting financial data. They called it the SPFS. It has been kept in reserve ever since to counter the USA's power.
Turkey found itself in a similar position. Therefore they joined Iran in using the Russians’ SWIFT alternative. Now they can trade with Moscow directly in rubles and lira.
Moscow has been pushing global use of the SPFS. Integrations are already underway with banks in China. They are using the China-based Cross-Border Inter-Bank Payments System.
Turkey and the USA have patched up their relations for now. The Turks and Russians managed to strike a deal, allowing the American troops to withdraw. As a result, the USA withdrew sanctions. But the threat still looms. Trump fired a parting shot: "The sanctions will be lifted unless something happens we’re not happy with". Either way, the UN is now cautiously optimistic after the resumption of diplomatic relations.
The Turkish people respond
But the Turks have had enough. Frustration reigns with the macroeconomic problems causing the lira's ongoing volatility. This has prompted them to turn to cryptocurrency instead. According to a study by ING Bank, approximately 18% of the Turkish population own some, compared to just 8% of Americans.
That makes Turkey the country with the most cryptocurrency holders in the world.
Some Hackernoon commentators on Turkish affairs believe that Turkey's economic difficulties could produce even more interest in crypto.
AVA Labs
Turkey has huge interest in alt coins, and particular excitement surrounds AVA Labs. This is a platform for the creation of new assets, markets and decentralized applications powered by the Avalanche consensus.They are tackling some of the toughest problems in the financial ecosystem and decentralized ledger platforms today. Just last week, Emin Gün Sirer, CEO of AVA Labs, Inc presented alongside representatives from Ethereum and Huobi at the Eurasia Blockchain Summit in Istanbul.There he spoke about how finance is outdated. How it is time to completely rethink how we transact among ourselves. Why we need to try to re-imagine how we represent ownership of assets, deploy capital and trade.
These ideas are directly relevant to the Turkish people. Especially now.
Without the protection of sound economic planning, the people are now taking measures to protect themselves. They are rejecting war games, international posturing and brinkmanship.
They want to regain control over their economic destiny.
Fifty three percent of Turkish respondents agreed that bitcoin is the future of online spending. This puts Turkey first among all the countries surveyed. Crypto has even become as popular as forex, unthinkable only a decade ago. American Express and other credit companies ignore this fact. However signs are now emerging that the Turkish people refuse to roll over any longer. They want to use the crypto they have accumulated to pay for goods and services.
Turkish retailers response?
It has started in earnest.
Electroneum
Electroneum is a UK-based platform that allows its users to mine its cryptocurrency on their smartphones. After successful operations in South Africa and Brazil, it has now launched in Turkey.
Deals are in place with the country's telecom companies for their users to pay with its ETN crypto.
Research indicates that there are over 25 million unbanked people in Turkey, a problem crypto immediately fixes.Electroneum also has plans to launch a new zero-fee platform. Users will be able to pay with ETN to learn, share and monetize their digital skills.
GoCrypto
Bringing the revolution to the Turkish store owners, supermarkets and department stores is GoCrypto. Led by the experienced Dejan Rolic and backed by Roger Ver, they are blazing a trail across south-eastern Europe. GoCrypto has already integrated crypto payments for over 530 vendors in Slovenia and Croatia. These retailers can now accept crypto payments from their customers. Plans for expansion into the Switzerland, the UK, Serbia and Bulgaria are also now confirmed.
But retailers in Turkey are up next. And early interest has already been received. Especially from those who want to cater to the country’s vast and under served crypto community. They want to cut costs. Transaction fees are far cheaper than their existing credit card methods. The lira’s volatility means they also want to give their customers other crypto payment options. Other benefits include it being free to set up, with no maintenance or running costs. Turkish GoCrypto merchants get access to the millions of crypto customers who want to pay from their bitcoin.com and Elly wallets. They can also choose between automatic settlement in Turkish lira or crypto. The coins available include Eli (ELI), Bitcoin Cash (BCH), Bitcoin (BTC) and Ether (ETH).As early adopters, they benefit from the support offered by each coin’s passionate communities.Sign up to become a GoCrypto merchant here!
Birth of crypto adoption
The early signs of a crypto revolution in Turkey are promising. Crypto is now taking hold as a means of payment in the country. Three pioneering fintechs and the country's three biggest telecom companies lead the way.That perfect storm of tenuous US relations and macroeconomic uncertainty has left a trail for crypto to flourish. The success of these early crypto trailblazers will be watched carefully.But only time will tell whether Turkey's dervishes will start whirling again. Then we will see whether Mesopotamia's neighbor can become the cradle of crypto adoption.
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