President Tayyip Erdogan has revealed that a cryptocurrency bill is prepared and ready to be presented to the Grand National Assembly (Turkey’s legislative chamber), and some analysts have been quick to allege that it is partially in response to significant capital outflows into digital assets such as Tether and Bitcoin.
But the crux of the issue rests in the (in)stability of the Lira – bleeding out 40% of its value this year – something halted only for a fleeting moment by a promised currency support package earlier in December.
The Lira’s perilous downturn can be directly attributed to a combination of continual cuts to interest in face of a uncurtailed covid-fuelled inflation rate, a knife in the back of an economy recovering from a 2018 debt crisis.
Erdogan’s plan involves the Turkish state indexing Lira deposits to protect them against future decline relative to hard currencies via state-backed reserves. The hope is to reassure citizens and stem the flow of capital fleeing the national currency.
This move briefly halted downside pressure for the Lira as markets felt reinvigorated by the increase in citizen’s purchasing power.