Although having a unique geographic location, there is currently little that lights up the world of the Turks. Way over a decade now, the country watches as the formerly well-positioned economy falls in apart into more and more pieces. Next to the countless changes of the governor position at the Türkiye Cumhuriyeti Merkez Bankası (eng. Central Bank of the Turkish Republic), inflation, trade deficits, heavy taxation and audit problems over $128 billion, the Lira has lost 10% in value against the US-Dollar, making it the 9th consecutive year of devaluation of the currency.
What is merely a lightly saddening development in the periphery for foreigners is a harsh reality for the country's citizens. The issue is no longer that people cannot grow and fulfil their wishes financially, but for many, the issue is today one of financial survival. It is no wonder that Turks look elsewhere to shield themselves against the burdening inflation rates, which are currently above 16%. The keyword here is cryptocurrency. Because of the critical economic situation, the citizens are already broadly involved in currency trading daily to lower inflation. Still, the performance of an average trader is often insufficient to catch up with such high inflation rates. Since cryptocurrencies are much more volatile, people hope to make more effective gains by trading them instead of fiat currency. Unfortunately, even this was not granted to the Turks.
On April 21, 2021, the crypto-trading platform, Thodex, stopped all operations due to acquisition talks with investors. With a daily trading volume of over half a billion dollars, the complaints amassed on the desks of countless lawyers and courts within hours. A day later, the police started investigations on Thodex and its management but found that the CEO, Faruk Fatih Özer, was already together with nine others abroad. They fled to Albania two days before, taking all the company's funds. Meanwhile, Interpol has also sent our red alerts globally to facilitate the manhunt on Özer. Whether the money of the over 390 000 users is now gone for good is not yet clear; even less so, whether, who, and how the money is going to return. Also, the total amount of potential losses is unclear, but that the trading with the volatile cryptos is now on halt is just a normal consequence. As such, the crypto market in Turkey, which had a total daily trading volume of over $1.7 billion, has experienced a significant setback.
As if that was not already enough, a second crypto-broker, Vebitcoin, announced on Saturday that all operations would be frozen due to the firm's financial problems. Whether these are liquidity problems, structural complications, or a scam, like Thodex, is not yet clear. Next to Vebitcoin's CEO, İlker Baş, three others were also taken in custody on Monday, while several bank accounts were frozen, too. As a preliminary measure, the Central Bank of Turkey is universally prohibited that cryptocurrencies can be used as a payment method, becoming effective on April 30.
Of course, no scam comes ever at a great time, but the crypto-disaster in Turkey evolved at a particularly bad time. As touched upon earlier already, trading with assets is the last resort for many Turks trying to achieve a minimum level of financial relief. Although stock trading is on the rise, the Turkish stock exchange is among the most rapidly growing stock exchanges in the world. Still, crypto trading is convenient for day trading to make absolute gains and, thus, use the money to pay the rising cost of living in Turkey. Building capital and planning for the future is simply unrealistic under the current conditions. With the recent Thodex scandal, the regulatory bodies will likely monitor this market more closely and make it subject to harsher restrictions. Many Turks will probably by themselves refrain from trading cryptos after such a scandal.