After facing one of the worst currency and debt crises in its history, the Turkish lira fell so dramatically that on May 23, 2018, foreign exchange markets in Istanbul ceased trading lira due to extreme lows.
The aftermath of the crisis forced credit rating agencies to downgrade Turkey’s debt and credit ratings, with many analysts predicting an incoming recession and austerity measures.
As part of an effort to revitalise the Turkish economy, President Erdogan’s government released plans in July 2019 to create a central bank-issued digital currency.
Now, the new national digital currency has been given a date for completion as Turkey moves ahead with its economic recovery.
Digital lira to deploy in 2020
The currency, aptly named the ‘digital lira’, was first presented to the Turkish parliament’s Planning and Budget Commission by Vice President Fuat Oktay. As part of Turkey’s medium-term 2019-2023 economic development roadmap, the new digital currency will be developed alongside Turkey’s central bank and the TUBITAK technology research council.
President Erdogan has now revealed that the digital currency may be ready to deploy sooner than previously thought. The Resmi Gazete, the Turkish government’s official journal, stated that tests of the digital lira are on course to be finished by the end of 2020. It’s expected that the digital currency will go live shortly after.
The digital lira will enable instantaneous transactions between Turkish citizens and offer a new range of decentralised financial instruments for the Turkish economy. Turkey’s Ministry of Treasury and Finance has also indicated that it intends to promote “digital transformations”, including encouraging initial coin offerings as a means to support new enterprise.
Digital currencies find popularity in Turkey
Because of the struggling Turkish lira, indicators show that Turkey is a strong contender for digital currency adoption. In fact, many young Turkish people turned to cryptocurrencies during the economic turmoil of 2018 as a safe hedge to protect their capital against inflation.
Estimates show that during the worst of the lira crisis, cryptocurrency trading volumes skyrocketed. Koinin, Turkey’s largest crypto exchange at the time, saw Bitcoin trading volume rise over 60% in the same period that the lira’s value fell over 10%.
The Turkish government’s efforts to expedite the development of its own national digital currency may well be fuelled in part by the strong demand for digital currencies among the country’s young population.