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Desperate Turks embrace cryptocurrency abandoning worthless Lira

Turkey President Recep Tayyip Erdogan

As Turkey’s inflation hit 48.69 per cent in January amid the dramatic fall in the value of its currency, lira, desperate and helpless citizens are now switching to crypto currencies.

According to reports, the daily trading in cryptocurrency is more than 1 million, even as the Recep Tayyip Erdogan government is yet to thrash out a clear policy on the same.

While digital assets have been gaining attention the world over, for the Turks, dealing in crypto currencies offers them a chance to skirt their otherwise eroding income levels.

“They see virtual currencies as a potential store of value to shield their savings as the lira is roiled by routs that saw the Turkish currency lose more than 40 percent of its value last year alone,” Al Jazeera said in a report.

Though Istanbul has shown its reluctance in embracing crypto currencies, trading of these ditigal currencies is allowed. In April last year, the country’s central bank also banned use of these virtual currencies for payment for goods and services.

Also read: Turkey's braces for the worst in the coming months as people queue up for food and medicines

“There is apprehension about investments in crypto but many are betting that the use of these virtual currency will be somewhat legalized. The problem is that no one wants to hold lira anymore..for many it is just nothing more than a piece of paper,” said an analyst.

Amid the drastic fall in the value of lira, Turks are also looking to reinvest in gold and US dollar.

Protests have erupted at various places as the citizens jostle to make their daily purchases of essential items. Many of them have no resources to buy essential items including food. “The situation is grim and one can see people queuing up desperately to buy bread," a person dealing with the business community said.

Erdogan however remains adamant about maintaining the low interest rate regime. Recently, Sait Erdal Dincer, who was the chairman of statistics institute TUIK was replaced after data released by the state owned agency showed that the country’s inflation rate last year touched a 36.1 per cent – highest in 19-years.

On December 2, Lutfi Elvan, then finance minister resigned. He was replaced by Nureddin Nebati, Ergogan’s yes-man, who has been vociferously defending Erdogan’s low interest rate policy even as inflation went through the roof.

“Turkey has now abandoned the monetary policy based on high interest rates that caused several developing countries to remain stagnant,” Erdogan defending his actions, said in a televised address to the nation in December.

Also read: Why Turkey’s growing presence in South Asia should worry India

The independence of Turkey’s Central Bank has also fast eroded with Erdogan resorting to replacing central bank governors in quick succession.

“That’s the way the Turkish President has decided to fight a financial crisis by regularly removing central bank governors and other senior policymakers..even a child can tell you that this is only going to make the situation worse,” the analyst added.