Turkish crypto shock: investors fear for hundreds of millions of dollars

Turkish crypto shock: investors fear for hundreds of millions of dollars
Bitcoin and Co. are very popular in Turkey because of the weak lira. But after the recent scandals, investor confidence has been shaken.
Ozan Demircan is a foreign correspondent with German and Turkish roots. Ozan Demircan

Many people in Turkey are trying their luck with Bitcoin and other cryptocurrency, presumably without knowing exactly what they are getting into. Source: Reuters
Riding a ferry across the Bosphorus in Istanbul.
Many people in Turkey are trying their luck with Bitcoin and other cryptocurrency, presumably without knowing exactly what they are getting into.

(Photo: Reuters)
Istanbul Caner Sen is facing ruin. The owner of a small Turkish publishing house had wanted to invest his savings well. So he decided to invest four million liras (440,000 euros) in cryptocurrency. Within twelve months, the equivalent value grew to 30 million lira, an increase of almost 700 percent.

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Last Friday, he wanted to exchange the digital coins he had bought on the local trading platform Vebitcoin for lira – and failed.

A representative of the platform had assured him over the phone that he would soon get his money. But Sen no longer believes that. „I want my money back,“ he demands.

A crypto earthquake is occurring in Turkey. First, the Turkish Central Bank banned cryptocurrencies as a means of payment in the country in mid-April. A short time later, the founder of a Turkish trading platform for cryptocurrency fled with presumably hundreds of millions of dollars. And now a local competitor is unexpectedly filing for bankruptcy.

Dogecoin Turkey Bitcoin

The platform Vebitcoin had ceased operations completely and justified this with financial circumstances. Cryptocurrencies with an equivalent value of around 60 million US dollars had been traded daily on the platform. The public prosecutor’s office and the financial supervisory authority are already investigating.

The events in Turkey shed light on a largely unregulated area for speculation with digital means of payment. In Turkey alone, cryptocurrencies with an equivalent value of around two billion US dollars are traded daily.

Digital assets such as Bitcoin are based on a decentrally organised booking system, whereby asset sums and payments are digitally signed and made transparently accessible to all – fraud is thus supposed to be made impossible.

Nevertheless, according to investigators, Faruk Özer is said to have succeeded in doing just that. The founder of Thodex, the first licensed trading platform for cryptocurrencies in Turkey, had closed the online platform for „four to five working days“ for allegedly necessary maintenance work.

The Justice Department supports Trump’s order on Section 230 and to neutralize social networks

On June 17, the U.S. Department of Justice issued new recommendations to reverse outdated protections required decades ago for online platforms that publish third-party content.

Section 230 and Internet Censorship
Section 230 of the Communications Decency Act was enacted in 1996, as the public had only recently welcomed the Internet into their daily lives. The controversial law freed platforms from legal responsibility for publishing third-party content.

The Justice Department’s recommendations include ending immunity for posting content involving child abuse, terrorism, and cyberbullying. He also argued:

„Section 230 does not apply in a specific case where a platform had actual knowledge or notice that the third-party content in question violated federal criminal law.

In addition, the new suggestions would make online platforms liable in civil, not criminal, courts for a broader category of illegal and harmful content. The civil court does not risk jail time, but allows fines that can shut down the companies‘ operating platforms.

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Follow-up to the attack on Trump
Some of the platforms that rely on Section 230 include Facebook and Twitter. In late May, President Trump issued an executive order that many saw as a reprisal against Iq Option in particular for what his office called censorship by these platforms. The order reads:

„Twitter, Facebook, Instagram, and YouTube exercise immense, if not unprecedented, power to manage the interpretation of public events; to censor, remove, or disappear information; and to control what people see or don’t see.

Donald Trump to his Secretary of the Treasury: „Go after Bitcoin“

Within days of that order, the Center for Democracy and Technology filed a lawsuit against Trump, calling the new order a First Amendment violation. A representative of the center explained the role of Section 230 in protecting online services to a degree that, for example, newspapers do not:

„Online services, even very small ones, handle a difficult volume of user-generated content that they may not be able to review before publishing. Section 230 is designed to give them the legal certainty they need to be able to moderate content that appeals to them, without running the risk of liability for all the content on their platform“.

CFTC president warns against „overly prescriptive rules“ on crypto
Does it apply to decentralized platforms?

Contrary to popular belief, decentralized platforms also rely on Section 230 protections. David Greene, an attorney with the Electronic Frontier Foundation (EFF), explained to Cointelegraph:

„All those who are intermediaries are governed by Section 230, both in their ability to decide what they will moderate because Section 230 protects decisions to moderate, and those who decide they will not because Section 230 protects them from liability. It’s based on when you don’t do anything to the contents at all. So I think it would be very illogical for anyone to think that this particular threat to Section 230 is really only attacking the side of moderation.

In March, EFF marked a bill that also appeared to be a direct attack on Facebook because of perceived bias.