PayPal has been forced to cease operations in Turkey. The shutdown will go into effect on June 6. Turkey recently denied PayPal of a new license, which is required to operate within the country. According to TechCrunch, the reason for the denial was that PayPal does not localize all of their IT infrastructure inside of Turkey.
Will Other Online Payment Providers Leave Turkey?
According to Kenci, PayPal’s reasons for leaving Turkey may also apply to other payment providers. Then again, others are able to earn exemptions. “Businesses like Western Union have been exempt from the law,” said Kenci.
“If the business is holding funds on behalf of the consumer, for the purpose of allowing the consumers to transfer money to other consumers or businesses, then the business needs an electronic money license,” explained Kenci. “If the business does not hold any consumer funds but allows businesses to accept payments, then they need a payment processor license. Electronic money license holders are allowed to operate as payment processors. So the latter license is a subset of the former. Each business is evaluated by the regulator on a case-by-case basis.”
Kenci also noted the regulation goes far beyond the reported requirement to keep all IT infrastructure within the country’s borders. “Everything from the organization chart to the CV of the CEO, from the paid capital of the business to how funds are held in bank accounts, [and] financial and security audits are within the scope of the regulation. And there are specific rules for each,” he explained.
Kenci added that all of these requirements create a barrier to entry for small businesses who wish to experiment with new, innovative ideas.
In terms of Kenci’s own business, he holds the view that the activities of BTCTurk do not fall within the scope of this law. “The regulation's scope is holding and allowing the transfer of funds in currencies recognized by the central bank of Turkey,” he explained. “The regulator has deemed that bitcoin is out of this scope.”
Can Bitcoin Help for International Transfers?
Although there has been a large amount of hype around the use of Bitcoin for international money transfers and remittances, real data on this sort of use case is not yet widely available. According to Kenci, SWIFT is the most popular method of sending money abroad, especially for amounts larger than $1,000.
“The banking infrastructure in Turkey is quite efficient, the digital channels (mobile, web) work well, and the transfer costs are below international rates,” explained Kenci. “Remittance companies, such as Western Union, are also well established and are available as embedded services in almost every bank.”
Where Can Bitcoin Help?
According to Kenci, PayPal was mainly helpful for transfers of small amounts of money and digital payments in Turkey. “We believe that this presents a good opportunity for Bitcoin,” he added.
Although Kenci said the recent PayPal news has helped with the PR presence of Bitcoin in Turkey, he also added that the maturity of Bitcoin services in Turkey and the rest of the world are not yet at a level where the technology can fill a void left by PayPal. Having said that, he also noted, “It is certain that the Turkish user base of PayPal will struggle to find a direct replacement.”
In terms of where Bitcoin is useful in general, Kenci explained, “The interest in Bitcoin, as we saw in Greece via our partner BTCGreece, increases when the existing financial infrastructure does not function, when there are strong capital controls or when people lose trust in national currencies as we currently see in China.”
According to Kenci, the financial infrastructure is strong in Turkey, and despite having weakened in the last year and a half, the Turkish lira continues to instill trust in a large part of the population as a store of wealth.