Near the banks of Istanbul’s Golden Horn, a natural harbor that has protected Greek, Roman, Byzantine, and Ottoman trading ships for thousands of years, a billboard displays the Turkish lira’s market rate: its value in dollars, euros, pounds, and bitcoin. That last one might be surprising, given that cryptocurrencies have experienced a massive sell-off this year, with bitcoin plunging as much as 33 percent in November. But its persistence in countries like Turkey points to the future of money and the global financial system. Since October, as bitcoin suffered record losses, trading volumes on Turkish cryptocurrency exchanges increased by 37 percent.
The summer’s lira crisis—in which Turks saw their life savings, pensions, and investments significantly devalued—paired with the country’s savvy youthful population could help explain why many are searching for alternatives to fiat currency (money backed by government regulation). A pair of recent surveys highlight the draw of cryptocurrency in the country: An ING/Ipsos study conducted between March 26 and April 6 (that is, before the lira crisis) found that 18 percent of Turks surveyed—compared with 9 percent of Europeans—own cryptocurrency. The U.S. rate, according to the study, stood at 8 percent. A Turkish research firm called Twentify found similar numbers in a poll taken after the lira crisis toward the end of August, when bitcoin dropped by nearly 10 percent that month: Nearly one-fifth of survey respondents admitted to purchasing and selling Bitcoin.
The cryptocurrency community’s response to the lira crisis tells a story of how geopolitics, emergent technologies, and financial speculators can converge for better or worse. The short of it involves the fate of an American pastor jailed in Turkey (who was released in August), and retaliatory tariffs by the U.S. against Turkish steel and aluminum imports. After Trump announced the tariffs via Twitter on Aug. 10, the lira lost more than 20 percent of its value in one day. Though the lira has since recovered much of its value, it is still down by more than 30 percent so far this year. Inflation also continues to be a major concern, hitting a 15-year high in September. Analysts warn that the Turkish economy could be heading into a recession.
With a plummeting national currency and fluctuating prices, it’s no wonder Turks would consider investments set apart from state-regulated institutions, even given cryptocurrencies’ risk and volatility. This phenomenon was noted by some in the cryptocurrency community: The anonymous co-owner of Bitcoin.org tweeted Aug. 13 that there had been a sizable increase in the number of visitors to the site from Turkey, adding, “This is how Bitcoin takes over the world … through replacing fiat currencies as they fall apart!”
Economic crises have been important catalysts in the brief history of cryptocurrency. Greece and Venezuela have experienced increased interest in virtual currency during their recessions. After all, bitcoin was introduced in the aftermath of the 2008 financial crisis in a white paper published by the pseudonymous Satoshi Nakamoto. Nakamoto wanted to create a system where individuals can send each other electronic cash online without a financial institution. The vast majority of our money is currently controlled by banks, entities that take a cut for facilitating our transactions to the tune of $1.7 trillion a year. A trustable decentralized currency that cuts the middleman out is a dream not just for the techno-anarchists among us, but also for countries like Turkey.
Emin Gün Sirer, a Turkish-American professor of computer science who runs the Initiative for Cryptocurrencies and Smart Contracts at Cornell University, brought up several reasons for why virtual cash proves so alluring for Turks. Together, the country’s demographics, its relatively young population compared to Europe, and the flexible adoption of new technology provide the conditions for an eager market for cryptocurrency. Culturally, Turks are drawn to financial schemes with a high profit margin, according to Sirer. With the economic uncertainty of the summer, a large amount of money in Turkey headed in that direction.
When Venezuela faced a similar economic crisis, a depreciating bolivar with skyrocketing inflation, President Nicolás Maduro called for a nationally backed cryptocurrency called the petro linked to the country’s crude reserves. Critics warned that it was a potential scam. Recently, Maduro increased the petro’s value by 150 percent, prompting a prominent Venezuelan economist to cast doubt on whether the petro could be considered a cryptocurrency at all, since its value is determined by Maduro as opposed to the laws of supply and demand.
Despite (or perhaps because of) bitcoin’s popularity in Turkey, state authorities have tried to sway people toward more conventional investments. In Turkey, Erdogan’s strategy was to urge citizens to convert their dollars to shore up the flagging lira, while promoting trade with Russia, China, and Iran in national currencies. The state religious authority, Diyanet, also ruled that it was not “permissible” for Muslims to use and trade cryptocurrencies. As if to prove the Diyanet’s point, Turcoin, fraudulently billed as an alternative national currency, turned out to be a Ponzi scheme as the founders attempted to flee with millions.
Despite the wildly speculative and fluctuating condition of cryptocurrency, it’s seen as an attractive form of alternative investment in emerging markets. For instance, a U.N. report bills Africa as the next frontier. In Nairobi, a Swiss-based cryptocurrency trading platform has started a pilot program to issue digital tokens in place of hard currency for residents in one of the city’s poorest neighborhoods. The tiny nation of Georgia is only second to China in the mining of bitcoins, and the first to secure land titles via the bitcoin network. Cryptocurrency remains an experiment in more reliable financial transactions, especially for those far from the global financial system’s reach.
Vedat Akgiray, a professor of finance at Bogazici University in Istanbul, says that trust in financial institutions is at an all-time low, not just in Turkey. In 2013, when then–Federal Reserve Board Chair Ben Bernanke announced the end of what is called quantitative easing, a policy that pumped more U.S. dollars into circulation, emerging market economies like Turkey started to feel the pinch. The lira’s value against the dollar started to steadily decrease, as the Fed tightened the spigots and began to increase interest rates.
For Turks, the fundamental unfairness of being beholden to the maneuverings of a central bank in Washington, Brussels, or London, not to mention the erratic rhetoric and behavior of their own government, has pushed them toward such virtual alternatives. As Sirer puts it, cryptocurrencies essentially “tie the hands of the sovereign in how money can be issued and controlled.” For countries like Turkey operating under the hegemony of the dollar-dominated financial system, cryptocurrency remains an attractive albeit risky dream. “It’s against everything we’ve been accustomed to for centuries,” says Akgiray. “It’s a real change.”