What Are Perpetual Futures?

At Scalable Solutions, we are continuously working on bringing more features and products to our clients and users. On this occasion, we have integrated Perpetual Futures into our white-label digital asset exchange solution. We want to use this space to review exactly what futures are, their characteristics, benefits and more.

Before tackling the question “What are futures?”, we first need to take a step back and understand that a future is part of a broader financial asset category: Derivatives.

A derivative is a contract that derives its value from the price and variation of an underlying asset.

Derivatives have a number of purposes, the main one being hedging against price movements of underlying assets. In fact, the first modern derivatives appeared in the Dutch Republic and Osaka during the 17th century; these were created as vehicles for rice farmers to hedge against the variability of their harvests.

Derivatives can be categorized into different classes — the most commonly known are options, forwards, swaps, and, as you might have deducted, futures. Within each class, the underlying asset can be any type of investment vehicle or financial instrument. It can be equity, bonds, interest rates, commodities, market indexes, etc.

In traditional financial markets futures contracts are agreements between two parties to buy or sell a company stock, bond, currency, or another instrument at a predetermined price and at a specified time in the future.

Unlike mainstream spot markets, futures contracts do not enable engaged parties to directly purchase or sell the underlying asset. Instead, they trade a representation of the said asset, with the actual trading occurring on settlement days.

Futures contracts are usually cash-settled and — unlike forwards contracts — live within centralized markets with clearinghouses counterparties. Quarterly futures contracts expire every four months, where the price of the future tends to merge with the underlying price. Additionally, we can find perpetual futures. As their name explains, perpetual futures lack prespecified delivery (expiration) dates, allowing indefinite roll-over.

Instead of using daily settlements, perpetual futures contracts use a different mechanism to maintain a direct relationship with the underlying asset — funding.

“Long and short traders exchange a funding cost periodically (say every 8 hours) to reflect the price expectations during each funding interval (i.e. the spread between the perpetual contract price and spot price) and the cost of funding.” [1]

Futures contracts allow for leverage trading. The most basic understanding of leverage is borrowing/lending money. Traders can carry out trades bigger than their net position (Leverage = 1x), by borrowing money at varying rates (funding rates). In this case, anyone can post trades that are 5x, 10x or even 100x greater than originally possible, while only providing a small security position to ensure that they can pay off any losses. Because of leverage, future markets are very liquid and extremely capital-efficient.

According to The Block Research, the trading volume of BTC and ETH futures in 2021 has risen beyond USD $32 trillion, a 338% increase when compared to 2020.

Also, total spot trading volume on centralized exchanges reached $14 trillion in 2021, 57% less than that of futures.

Source: Volume of BTC and ETH Futures (Jan. 18th, 2022). Coinglass.

Still, in order to borrow funds, users need to post collateral; this is also otherwise known as ‘initial margin’ (the minimum value you must pay to open a leveraged position). In addition to the initial margin, traders need to maintain a certain ‘maintenance margin’; this is the minimum amount of collateral that must be held to keep a trading position open. In those cases where the margin balance drops below the maintenance level, traders will receive a margin call (asking them to add more funds to their account). If the margin is not met, the exchange will trigger a position liquidation, draining a trader’s funds and leaving them with no spot asset.

You can find more on margin trading, options and futures in our blog.

Below you can find the most common uses and advantages of futures contracts.

  • Futures enable hedging and risk management by providing exposure to many assets.
  • When expecting an adverse price movement, traders can post short positions and take advantage of the downward movement. This case would not be possible if one could just buy and sell spot positions alone.
  • Traders can enter positions that are larger than their account balance by the use of leverage — borrowing funds from liquidity providers in order to carry out big trades and realize greater profits.
  • Futures markets tend to improve the liquidity of any asset pair.

Scalable has integrated Perpetual Futures into its white-label exchange solution. The feature is now available under the “Futures” tab, along with a futures market overview for the current time and the updated Terms of Trading. Currently, Scalable exchanges support the most predominant perpetual futures tokens, and is working on including several more.

The current list includes:

BTC, ETC, LINK, ADA, LUNA, SOL, DOT, BNB, MATIC, EOS, AVAX, LTC, SHIB, TRX, MANA, ZEC, XLM, UNI, AAVE, XRP, BCH AND HIT.

You can get in touch with our team to schedule a demo or find out more about Scalable’s white label exchange infrastructure and features.

[1] “What Are Perpetual Contracts?” Bybit Learn, 10 Nov. 2021, https://learn.bybit.com/trading/what-are-perpetual-contracts/.

How to Choose a White-label Cryptocurrency Exchange Software?

The cryptocurrency industry is relatively young but already aims to reach 1B by the end of 2022, which makes it very alluring for entrepreneurs. When thinking about what service to launch, a crypto exchange is what comes to mind first. And there is no surprise: exchanges offer a wide range of services, most of which are the most important in terms of finances, and accumulate a heterogeneous audience from experienced traders to newbies. 

You can already imagine how difficult it is to build one from scratch: aside from developing software, one should find a liquidity source, provide custody, choose a jurisdiction to work under and much more. Luckily, there is another solution – white-label crypto exchange. It’s a turnkey solution that is already developed by companies to offer to a client who can rebrand, add a unique design with logo and choose instruments, features and assets that he/she needs.

What are the pros of a White-label crypto exchange?

Let’s look at the main benefits that make white-label solutions so popular.

  • The platform is tested. You won’t need to ensure that everything’s working right, because the platform was already used by clients. For example, Scalable Solutions is on the market since 2013, meaning that our technology is time-tested
  • Fast setup. Building a cryptocurrency exchange from scratch will take you a year or longer, while a white-label exchange is already developed and only needs a quick setup, so one can enter the market much faster. At Scalable Solutions, the setup process takes around 6 months.
  • Ready-made solution. While developing an exchange, one should take many components into account: liquidity source, custody, security, and many others. An inexperienced (and sometimes even experienced) entrepreneur is sure to confront many problems, while a white-label exchange offers a ready-made solution where all the nuances are taken into account.

What are the cons of a White-label crypto exchange?

  • You are not the owner of the technology. It means that you can’t sell the technology and become an exchange software provider yourself.
  • Some solutions provide a poor set of features. Not all platforms are built the same and provide an equal set of features. Some of them offer only basic structures, and some (Scalable Solutions included) provide a larger set of features to choose from and allows clients to have their own customization and branding.
  • Some solutions lack scalability. Scalability is often the weak link of an exchange. Not every platform can scale while the number of traders and trading volume is soaring putting a heavy load on the system. But we can cope with it! Our solutions are modular and scale up with your business, so we fully justify our name.

Key points to focus on

Security

Security is the main principle of all financial services, so pay close attention to whether a chosen exchange provides an appropriate level of security. Does it comply with AML? Does it have 2FA? Can you integrate a hardware wallet into it? 

At Scalable Solutions, we went even further: we have our own innovative custody technology that is offered to our customers.

Interesting fact: being on the market since 2013, we repelled a lot of hacker attacks and have never lost a single penny of our customers’ funds, so “security is our top priority” is not just a bunch of words for us.

Liquidity

Many entrepreneurs face the problem with liquidity when choosing a white-label exchange. You’d better be careful when choosing a liquidity provider, as some of them have aggregated liquidity from multiple sources. It can result in low quality of liquidity or low liquidity levels on some trading pairs, resulting in order book imbalances, high volatility, and spikes in prices. Also, high volatility often leads to wide spreads. We recommend you choose an exchange with built-in liquidity but ensure it is deep. 

Scalable Solutions is proud to provide connectivity to the deepest liquidity pool in the industry aiming at 10-15% of global spot liquidity. It results in a 0.01-0.02 spread on top pairs and a narrow spread across the book’s depth ensures a balanced order book.

Functionality

One of the main things to consider is the functionality of the service itself. Ensure it provides all the necessary features: spot trading, margin trading, futures trading, etc. It would also be great for it to have some additional features like staking. It’s a benefit if it already has KYC and KYT providers, and on-ramp solutions to buy crypto for fiat. 

Talking about Scalable Solutions software exchange, it provides spot trading, margin trading, futures trading, and staking. There’s a price chart and analytical tool from Trade view, the leader among crypto chart providers. 

In regards to our technological partners, we have multiple KYC and KYT providers to choose from. Some of them are: Sumsub, Elliptic and Chainalysis. Also, we have fiat-to-crypto providers, such as MoonPay, Simplex and Mercuryo.

Technical Characteristics

Pay attention to the technology itself, because a sophisticated trade engine provides low latency, as it matches orders very quickly.  

Another factor worth mentioning is transaction speed, measured in Transactions Per Second (TPS). Our exchange’s TPS is 100.000 trades per second.

Additionally, it would be better for an exchange platform to have both desktop and mobile versions. We, at Scalable Solutions, offer a good adaptation of a desktop version for mobiles.

Interoperability

The question of interoperability is the cornerstone of crypto in general. It means that different blockchains, i.e. Ethereum, Solana, Near, and others can’t “communicate” with each other without Bridges. Applying to exchange, the platform needs to be working with multiple blockchains to provide many popular assets. Scalable Solutions’ exchange supports more than 120 blockchain and is blockchain agnostic, meaning that our solutions can literally support any blockchain.

Scalability

A good exchange is able to handle large trading volumes along with large transaction volumes. It needs to have fast servers, nearly 100% uptime, and good support service. Only by having these key characteristics, can an exchange earn users’ trust and truly scale. 

We at Scalable Solutions are proud to provide superior execution with less than 500 microseconds for collocation and 99.99% uptime. 

Institutional-Grade Connectivity

Digital asset exchanges provide trading through bridging several actor needs: retail traders, institutional investors, brokers, and more. Communication and connectivity between these actors and exchanges also relies upon APIs. The majority of cryptocurrency exchanges use two mainstream API protocols: REST and WebSocket. 

While both WebSocket APIs and REST have several use cases, FIX provides a comprehensive solution that is particular to trading of digital financial assets. FIX is the connectivity protocol specifically designed for global financial markets.

Scalable is one of the few to support the FIX protocol – standard in global financial markets, but unusual  in the digital assets sector. It allows established financial institutions to  integrate trading algorithms designed for traditional markets seamlessly into the world of digital assets.

Support

Imagine a newby exchange operator who stays one-on-one with the highly technological solution not knowing what to do or a business owner who doesn’t really understand his own project. What can happen if a white-label solution doesn’t provide high-quality support.

Scalable offers a full scale training program, covering every component of the system, which prepares exchange operators  to run the business smoothly. Scalable’s Customer Success Team is available to clients 24/7, answering questions,

communicating updates and system upgrades, and resolving any immediate B2B operational issues.

Closing thoughts

Choosing a good white-label exchange is a challenging task that requires lots of research. To make this process a little easier, try considering the above-listed factors. 

Feel free to book a demo to know more about our products and ask any questions about your future business.

Stepping into 2022 with Scalable Solutions

As the new year fast approaches, Scalable Solutions has been busy at work finalising some exciting product updates for our current and future clients to enjoy in 2022.

Let’s take a quick look at some of the highlights of the past year.

  • Scalable integrated SumSub, an identity verification platform that provides an all-in-one technical and legal toolkit to cover KYC/KYB/AML needs. The partnership with SumSub helped our clients to easily tackle all onboarding and compliance challenges that come with identity verification. Moreover, it optimized KYC and AML procedures by converting existing policies into automated digital processes that allow faster and safer customer onboarding.
  • We introduced Scalable Audits, a product aimed at helping smart contract projects ensure robust security. Through a thorough analysis of the source code architecture, Scalable identifies vulnerabilities and provides a Security Audit report with recommendations to guard against potential attack vectors.
  • Additionally, Scalable is one of the few to support the FIX protocol — standard in global financial markets, but unusual in the digital assets sector. It allows established financial institutions to integrate trading algorithms designed for traditional markets seamlessly into the world of digital assets. The Scalable platform uses the most advanced APIs. Also, it supports FIX protocol 4.2 (standard in US equities today), 4.4 and 5.0 for MD feeds and managing orders. These battle-tested protocols are optimized for minimum latency.
  • Scalable also took a deeper dive in digital asset adoption, developing a series of articles exploring cryptocurrency adoption and regulatory frameworks in regions around the world — find them here.

Stepping into 2022 with Scalable Solutions

For 2022, we have planned an array of positive updates, both to our products and the way we work. Our team has expanded substantially to accommodate the growing demand for advanced trading infrastructure and our company growth plans for the new year.

Below you will find some of the new products and features you can benefit from straight away.

We’re delighted to share that from 2022, Scalable will offer clients its own white label custodial wallet. The wallet is an add-on integration to Scalable Solution’s digital asset exchange, allowing for a comprehensive white label offering. With the Scalable wallet, users can easily buy, send, receive and swap every asset listed on the exchange.

The digital asset wallet features include:

  • An intuitive interface that makes it simple to navigate and trade, regardless of experience
  • It ensured high level security through advanced cryptography
  • Cross-platform functionality
  • Tailored news feed per digital asset
  • It supports the most popular payment methods
  • An option to customize the wallet according to your brand, with a variety of language options

Scalable has integrated Perpetual Futures into the exchange solution. The new derivatives instrument acts similarly to traditional futures contracts. The main difference is that it has no expiration date and can be held indefinitely.

This feature is supported by the Futures Tab with a futures market overview for the current time and the updated Terms of Trading.

SumSub Liveness Check

We are partnered with SumSub to provide a secure and easy KYC process, especially with the new Liveness Check feature. Users no longer need to take a selfie with a passport to prove their identity, or wait for the manual verification that causes delays in the KYC process.

In brief, Liveness Check is based on a biometrics verification. This is a safer and more user-friendly verification method, as opposed to selfies. The ability to perform automated checks reduces officers’ workload and users’ wait times. Trading clients can pass verification in as little as 4 seconds, drastically reducing drop off rates.

Simplex & XanPool Payment Gateways

Simplex and XanPool are the newest additions to our platform, facilitating fiat to crypto payments. Our clients now have a choice of five cryptocurrency payment gateways — BanxaMoonPayMercuryo, and the aforementioned Simplex and XanPool.

Prime Trust

The integration with Prime Trust, an innovative open-banking financial solutions provider, allows users to move fiat on the exchange in real time and on a limitless basis. Hence, we can reduce the time to market in a secure and regulated manner.

Hidden Orders (HO)

The feature allows users to place hidden orders. Thus, we can exclude the influence of the order on the market, enabling a more profitable order execution.

The feature is now available through API, but will soon be available on the web.

Reduce-Only Orders (RO)

When users place a close order, they need to ensure that it doesn’t flip the position. In order to do this, we propose a Reduce Only feature for orders.

Reduce Only is a parameter for buy or sell orders. When specified, the order is limited by the size of the current position and orders before it. Reduce Only orders are compatible with any type of order (except for Scaled orders on the web) and any Time in Force instructions, but are available only on margin and derivatives.

The feature is now available through API, but soon will be available on the web.

Take Profit Orders (TP)

We have added a new order type called Take Profit order (Take). Similar to a stop-loss order, it is activated only when a certain price is reached on the market, but with the reversed price condition. TP Orders are available on all markets, including spot, margin and derivatives.

The feature is now available through API, but will soon be available on the web.

At Scalable Solutions, we are excited for what 2022 will bring and the innovations we have in store for our clients.

We would like to take this opportunity to thank you for your support and wish you a wonderful year ahead. Happy 2022 from Scalable Solutions!

Digital asset exchanges in 2021: Learning from mistakes

Digital asset exchanges in 2021: Learning from mistakes

Introduction

As the digital asset ecosystem continues to break records – transacted volume, total value locked, userbase, and more – it increases the incentive for malicious actors to exploit it. In 2020 and 2021 alone, the amount of funds locked on DeFi protocols increased from USD $500 million to USD $247 billion. Loots rose consequently – according to an Elliptic report, 2021 DeFi exploits totalled USD $12 billion – with theft and fraud accumulating roughly 87% of that amount, a sevenfold rise from the previous year [1]. There is lots to learn from the mistakes made by digital asset exchanges in 2021. 

Analyzing past events is one of the first steps of improving the cycle. As we approach the end of the year, we take a look at the major events that played out in the digital asset landscape, with a focus on learning from the negative and unusual. With this information, we can improve the decision-making process for the upcoming year.

Read on to find out the mishaps that tormented digital asset exchanges in 2021, and how the right technology partner can help avoid these. 

2021 cryptocurrency exchange mishaps

The following guidelines can be used to evaluate exchanges:

  • Market Manipulation

Unfortunately, several exchanges are incentivized to engage in market manipulation practices – pump and dump schemes, wash trading (suspicious trading behaviour using bots), order book manipulation, insider trading, etc. According to NASDAQ’ crypto surveillance unit, wash trading is prevalent in 33% of all transactions.

In a recent study of 29 digital asset exchanges, wash trading accounted for twice as much as NASDAQ reported. According to estimates, wash-trading practices represent roughly 70% of reported volume, improving an exchange’s rankings, temporarily distorting prices, and attracting more users [2]. 

  • Security

Centralized cryptocurrency exchanges have been destabilized by several hacking events in 2021. Among the most significant are the Liquid Global and Bitmart cases. The Liquid Global exchange suffered a hack in August that resulted in the loss of over USD 80 million, forcing Liquid to secure USD $120 million in debt financing from FTX Trading [3]. A few weeks ago, Bitmart lost roughly USD $100 million in Ethereum wallets. It was later discovered that a concurrent hack had taken USD $96 million more from its Binance Smart Chain wallet holdings [4].

Learn about security in digital asset exchanges: Security Issues in Digital Asset Exchanges.

  • Scaling and Outages 

Based on previous experience of traditional financial markets, it would be fair to assume that the high number of scaling issues found throughout digital assets’ history would tend to decrease in time. Surprisingly, to this date, outages and platform freezes have continued to characterize centralized cryptocurrency exchanges from the smallest ones to the biggest ones. 

The months of May, August, September, November and December saw the biggest scaling challenges in 2021. Binance and Binance.US, Coinbase, Kraken, Gemini, Bitstamp, and dozens more have suffered significant downtime and loss of users funds because of this [5]. 

Perhaps you’ve even read about the class action proceeding that faces hundreds of investors against Binance. These investors reported having lost hundreds of millions of dollars during a major outage, and are aligning to sue the exchange that has no official headquarters [6]. 

Want to know more about scalability?: Digital Asset Exchanges: The Issue of Scalability.
Want to know more about outages?: The other side of Bitcoin’s ATH: Outages.

  • Customer Service 

Customer service is often disregarded as it is not a primary input that any user takes into account when selecting a specific digital asset exchange. Still, it has continuously proven to be more and more relevant as issues arise throughout the trading and investment process. While superior customer service lacks its corresponding publicity, inadequate customer service takes the spotlight in all major social networks. Current cases like that of Coinbase display the inconveniences that hundreds of users go through when reporting issues such as hacks and drain of funds [7].

The lack of satisfactory – or even adequate – customer service has proven to impact centralized exchange’s user base and profitability.

Read about Customer service in digital asset exchanges: Customer support and KYC Integrations in Digital Asset Exchanges.

Going the extra mile: Exchanges’ responsibilities

Astonishingly, current exchanges also suffer from non-technical errors. Even unchecked user errors – such as “fat-finger” or trading algorithms – continue to impact the trading experience – and success – of several traders. The most recent and clear case that showcases this lack of attention and verification mechanisms is that of October 20th. Solely on BinanceUS, Bitcoin momentarily plunged 87% – from ~ USD 65,000 to USD 8,200 – overwhelming its order book [8].

A truly Scalable Solution

In Scalable Solutions you can find the most delicate and robust mix of high-end security, liquidity, technology scaling, KYC and regulatory verifications, and superior customer service. Clients that utilize our white-label services are becoming industry leaders. Scalable technology powers exchanges in the top 50 exchanges by volume and have processed trillions of dollars in transactions, yet have never been breached.  Scalable technology provides a myriad of mechanisms that can make your digital asset exchange top of the industry, without the 2021 mishaps explored above.  Get in touch today to book a demo. 

 

 

 

References

[1] Browne, Ryan. Criminals Have Made off with over $10 Billion in ‘DeFi’ Scams and Thefts This Year. CNBC, 19 Nov. 2021, https://www.cnbc.com/2021/11/19/over-10-billion-lost-to-defi-scams-and-thefts-in-2021.html.

[2] Cong, Lin William, et al. “Crypto wash trading.” arXiv preprint arXiv:2108.10984 (2021).

[3] Partz, Helen. “Hacked Liquid Exchange Receives $120m Debt Funding from FTX.” Cointelegraph, 26 Aug. 2021, https://cointelegraph.com/news/hacked-liquid-exchange-receives-120m-debt-funding-from-ftx.

[4] Sarkar, Arijit. “Bitmart Hacked for $200m Following Ethereum, Binance Smart Chain Exploit.” Cointelegraph, Cointelegraph, 5 Dec. 2021, https://cointelegraph.com/news/bitmart-hacked-for-200m-following-ethereum-binance-smart-chain-exploit.

[5] Keely, Aislinn. “Crypto Exchanges Report Outages amid Extreme Market Volatility.” The Block, 19 May 2021, https://www.theblockcrypto.com/linked/105366/exchanges-outages-market-volatility-eth.

[6] Browne, Ryan. “Cryptocurrency Traders Seek Damages from Binance after a Major Outage Cost Them Millions.” CNBC, 19 Aug. 2021, https://www.cnbc.com/2021/08/19/cryptocurrency-traders-seek-damages-from-binance-after-major-outage.html.

[7] Young, Martin. “Coinbase Users Angry with Customer Support after Funds Disappear from Accounts.” Cointelegraph, 25 Aug. 2021, https://cointelegraph.com/news/coinbase-users-angry-with-customer-support-after-funds-disappear-from-accounts.

[8] Baker, Nick. Bitcoin Crashed 87% on Binance’s U.S. Exchange Due to Algo Bug. Bloomberg, 21 Oct. 2021, https://www.bloomberg.com/news/articles/2021-10-21/bitcoin-appears-to-crash-87-on-binance-in-apparent-mistake.

Sources

Walker, Martin C. W., and Winnie Mosioma. “Regulated Cryptocurrency Exchanges: Sign of a Maturing Market or Oxymoron?” LSE Business Review, 16 Apr. 2021, https://blogs.lse.ac.uk/businessreview/2021/04/13/regulated-cryptocurrency-exchanges-sign-of-a-maturing-market-or-oxymoron/.

The state of digital asset adoption in Turkey

Turkey has been at the center of the digital asset adoption discussion for some time now. As a country with the potential to become a global blockchain hub, it deserves careful revision.  

The adoption measurement struggle

Measurement of digital asset use in Turkey has proven to be a more delicate task than in other countries. In its 2021 Global Customer Survey, Statista presented Turkey as one of the top five countries leading digital asset adoption worldwide. According to the study, nearly 16% of survey respondents said they owned or used digital assets [1]. 

Conversely, two recent studies carried out by local exchanges draw a sharp contrast to this posture. Istanbul-based leading cryptocurrency trading platform Paribu reported a digital asset use of less than 1% in 2020, with an eleven-fold increment in 2021 (~7.7%). The same report details a 54 percentage point increase in the number of people who heard about cryptocurrencies; a 74% user satisfaction related to transaction experience was also noted. Respondents also selected the ability to execute transactions 24/7 with no geographic restrictions to be the predominant advantage for digital assets’ use. Interestingly, this growth in digital asset awareness did not come accompanied by knowledge in its underlying blockchain technology. For example, four-out-of-five people never heard of blockchain technology, virtually maintaining this level from the previous year [2].

Furthermore, a more recent data-centered integral study carried out by Statista displays the growth of daily users of selected applications that allow cryptocurrency storage, from January 2017 to February 2021. Nearly 300,000 users utilize cryptocurrency-related storage applications daily, with BtcTurk PRO and Binance leading the list.

 

 

cryptocurrency storage in Turkey

Source: Average number of daily active users (DAU) of selected apps that allow for cryptocurrency storage in Turkey from January 2017 to February 2021 [3].

Potential reasons for adoption

Similarly to many South American or African countries, digital assets have served as protection against inflation in Turkey, and fueled the interest in those looking for a hedge. In February, the lira experienced an inflation rate jump of 15%, a percentage considerably higher than the 5% target set by the monetary authority. In addition to the inflation jump, the lira continues its long-term depreciation against the US dollar. Since its value of 1.78 USD/TRY in October, the exchange rate has been steadily increasing to 8.5 USD/TRY in September 2021, to its current 12.36 USD/TRY.

The current state of affairs

In addition to the opposing positions that overburden the analysis on digital asset adoption in Turkey, one can encounter further data-related challenges – with volume analysis being a central one. Take, for example, the $2.8 billion traded between March 20-24 – a spectacular increase when compared to the $12 million traded during the same period last year. What would otherwise be a valuable piece of information on adoption trends, is subject to a thorough examination. This stems from Turkish exchanges not requiring licenses, with several operating with inflated volumes and incurring unethical practices [4].

A timeline of recent events

Some relatively recent events from 2021 that will probably affect the adoption of digital assets in Turkey include:

  • April 16th. The Central Bank of the Republic of Turkey (CBRT) announced the prohibition of the use of cryptocurrency as a payment method. While taken as a setback by millions of users and payment firms, this statement did not make it illegal to trade digital assets. It did not change the circumstances for cryptocurrency exchanges.
  • April 30th. The CBRT banned the use of digital wallet providers as fiat on-ramps for crypto exchanges. This was the first attempt at introducing a legal framework that would define digital assets as “intangible assets that are virtually generated using a distributed ledger or a similar technology and distributed over digital networks,” not as currencies.
  • September 15th. The CBRT advanced an R&D project to analyze the prospect of a digital Turkish Lira. It signed a memorandum of understanding with three domestic research and technology companies that will form the “Digital Turkish Lira Collaboration Platform.” Participants will develop and test the digital lira prototype network [6] [7].
  • September 20th. A conflict arose between Turkish authorities. Turkish President Recep Tayyip Erdoğan spoke against the CBRT position on digital assets, declaring it to be at ‘war with cryptocurrencies’ [8].

Conclusion

While the current status of digital asset adoption is momentarily unclear, we can gauge one probable conclusion – the Turkish region will be subject to many blockchain-related developments in the coming years. Those developments may see extraordinary adoption rates, political and regulatory developments, or a combination of both. 

Your Scalable Solution

Scalable Solutions can provide a wide range of products and services in the space to make the ‘create your exchange’ journey easier – regardless of the region. With several partners to help our clients navigate the regulatory requirements needed to run an exchange, we are equipped to swiftly adapt to new circumstances – both technological and regulatory.

Get in touch with us today to bring your project to life. 

 

 

 

 

References

[1] Buchholz, Katharina, and Felix Richter. “Infographic: How Common Is Crypto?” Statista Infographics, 17 Mar. 2021, https://www.statista.com/chart/18345/crypto-currency-adoption/.

[2] Paribu, Akademetre. June 2021. Cryptocurrency Awareness Research. Accessible at https://www.paribu.com/blog/wp-content/uploads/2021/09/Arastirma-raporu-ENG.pdf.

[3] Best, Raynor de. “Most Popular Cryptocurrency Apps Turkey 2021.” Statista, 7 May 2021, https://www.statista.com/statistics/1222485/most-popular-cryptocurrency-wallets-turkey/.

[4] Diwakar, Amar. Why Are Cryptocurrencies Booming in Turkey? https://www.trtworld.com/magazine/why-are-cryptocurrencies-booming-in-turkey-45827.

[5] Kahraman, Erhan. “Crypto Payments Banned in Turkey – Is This Just the Beginning?” Cointelegraph, 20 Apr. 2021, https://cointelegraph.com/news/crypto-payments-banned-in-turkey-is-this-just-the-beginning.

[6] Bryanov, Kirill. “Turkish Central Bank Taps Local Tech Firms for Digital Currency R&D.” Cointelegraph, 15 Sept. 2021, https://cointelegraph.com/news/turkish-central-bank-taps-local-tech-firms-for-digital-currency-r-d.

[7] “Press Release on Central Bank Digital Turkish Lira R&D Project.” TCMB, 15 Sept. 2021, https://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN/Main+Menu/Announcements/Press+Releases/2021/ANO2021-40.

[8] Kahraman, Erhan. “’We Are at War’ with Crypto, Says Turkish President Erdoğan.” Cointelegraph, 20 Sept. 2021, https://cointelegraph.com/news/we-are-at-war-with-crypto-says-turkish-president-erdogan.

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