Turkey seeks to regulate cryptocurrency market after major frauds

Turkish government has sought to impose measures to regulate the booming cryptocurrency market after two major exchanges collapsed in Turkey, which had dealt a blow to hundreds of thousands of investors.

Istanbul-based Thodex ceased its operations on April 20. The founder of the company has fled to Albania, according to Ankara, allegedly with 2 billion U.S. dollars from investors’ assets.

Interpol issued a red notice for the fugitive after a request by Ankara, while dozens of suspects were nabbed in a countrywide police operation.

Three days later, another cryptocurrency exchange Vebitcoin said it had ceased all activities after facing financial strain.

Turkish police detained its main executive and seven other people as part of a broader fraud investigation.

The cryptocurrency market grows exponentially in Turkey, with an estimated 5 million active investors. Experts say the collapse of the two trading platforms reflects weak regulations of the industry.

“This is a Ponzi scheme, some form of fraud network, offering the dream of getting rich easily by luring people through tempting promotional advertisements,” Baki Demirel, associate professor at the economy department of Yalova University, told Xinhua.

“People move towards the unregulated market in a bid to evade taxes and make a fortune,” Demirel said, highlighting the need to bring some regulation to the market.

“There has to be clear rules and transparency to prevent manipulations, and licences should be attributed to people who want to create new platforms,” Demirel stressed.

Given the damage and transaction risks, Turkey announced a decree on April 16 that it would ban the use of crypto assets in payments for goods and services, which went into effect on April 30. Meanwhile, the government was also reportedly mulling over a series of measures to prevent new frauds.

Turkey’s Central Bank Governor Sahap Kavcioglu said the Treasury and Finance Ministry is working on wider regulations regarding cryptocurrencies, adding that the bank does not intend to ban them.

Demirel called on international cooperation in fighting against crypto frauds. “Turkey is not the only country afflicted by this issue, which prevails over many other countries. Without a global regulatory system, fighting against crypto frauds will be difficult,” he said.