Turkey’s Crypto Adoption Raises Financial Stability Concerns, FSB Seeks New Rules

Turkey needs to strengthen its regulatory framework for cryptocurrencies and stablecoins as growing adoption raises potential risks to financial stability, the G20’s Financial Stability Board (FSB) has said.

The global watchdog acknowledged that the country had made progress in bringing much of its crypto market under regulatory supervision. It called for further measures to align Turkey’s rules with international standards and address risks linked to the expanding sector.

Turkey’s Growing Crypto Market Raises Stability Concerns

Turkey’s crypto market recorded nearly $200 billion in transactions last year, with retail investors accounting for a significant share of activity, according to Reuters, citing the FSB’s review. Cryptocurrencies and stablecoins have also become increasingly important in the country as people look for alternatives to the Turkish lira, which has faced years of depreciation amid high inflation.

The FSB has raised concerns about the foreign-exchange links of these assets and their potential effects on the wider financial system. Stablecoins, which are generally pegged to currencies such as the US dollar, are a particular area of concern.

What Changes Has The FSB Recommended

The FSB has called on Turkey to establish dedicated regulations for stablecoin issuers. Its review noted that the country currently lacks a specific framework governing these entities, which raised concerns about the financial stability risks associated with dollar-linked digital assets.

The watchdog has also recommended a formal system to monitor financial stability risks arising from crypto activities. It wants authorities to improve the collection and centralisation of market data and strengthen cooperation with regulators in other countries.

Turkey has already introduced certain safeguards to limit the connection between crypto assets and the broader financial system. These include a ban on using cryptocurrencies for domestic payments. However, the FSB said further coordination between countries was necessary because crypto markets operate across national borders and their risks cannot be addressed through domestic measures alone.

How Does India’s Approach To Crypto Differ

Crypto regulations and tax policies vary across countries, with India following its own approach to virtual digital assets (VDAs). In India, income from the transfer of VDAs is taxed at 30 per cent. A 1 per cent tax deducted at source (TDS) is also applicable on the consideration paid for such transfers, subject to specified transaction thresholds.

Crypto exchanges and other VDA service providers are also required to register with the Financial Intelligence Unit-India (FIU-IND) and comply with anti-money laundering requirements.