Turkey needs stricter rules for cryptocurrencies and Stablecoins as digital asset trading continues to grow, the Financial Stability Board (FSB) said on November 11. In its latest review, the G20 financial watchdog acknowledged that Turkey has made progress in bringing the crypto industry under regulatory supervision.
However, it warned that gaps remain, particularly around Stablecoins and the risks they could pose to the country's financial system. Turkey's crypto market recorded nearly USD 200 billion in transactions last year, according to the review.
Cryptocurrencies and dollar-pegged Stablecoins have become increasingly popular among residents looking for ways to protect their savings from the falling Turkish lira and persistent inflation.
The absence of clear guidelines for Stablecoin issuers was among the most notable deficiencies noted by the FSB in the country’s regulatory regime. Stablecoins, in general, are tied to traditional fiat currencies like the US dollar and, therefore, represent a significant issue from the perspective of financial regulation.
According to the watchdog, the increased adoption of dollar-denominated digital currencies can pose higher risks regarding foreign exchange and may facilitate 'digital dollarization.' Such actions would reduce the role played by the domestic currency in the economy. The FSB urged Turkish authorities to create special regulations for Stablecoin issuers and supervise cryptocurrency-related entities more effectively.
Also Read: Goldman Sachs, Citigroup Back USD 270M Stablecoin Venture
Turkish authorities have already established various measures that include licensing requirements for cryptocurrency providers. Turkey has also outlawed the use of cryptocurrencies as a means of payment within the country and taken measures that require the segregation of customers' money from the firm's money.
The FSB also recommended that Turkish authorities establish a formal framework to monitor financial stability risks and strengthen oversight of the country's cryptocurrency market.
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