It has been a rough year for crypto. Prices have plunged, projects have collapsed and companies are laying off employees. In the U.S., bitcoin does not appear to be acting as the inflation hedge it was supposed to be. Nor has it been a safe haven from the turmoil of the stock market. One might ask: What is the point of crypto, anyway?

A country like Turkey provides some answers. After conversations with nearly two dozen people in the Turkish crypto community, I caught a glimpse of a world in which crypto is not a game, but a necessity.

Crypto fever is palpable in Istanbul. The area around the Grand Bazaar hosts several small businesses where you can just walk in and exchange cash for bitcoin (BTC) or tether (USDT). My colleague said the first thing she saw at Istanbul airport was a huge crypto ad. There are at least 8 million people in Turkey engaged in crypto, according to an estimate in a 2022 research report by the Turkish crypto exchange Paribu, one of the largest crypto exchanges in Turkey. Just last week, President Recep Tayyip Erdoğan highlighted the benefits of blockchain technology, while advising young people to stay away from gambling with cryptocurrency. He also said that Turkey wanted to be a producer, not a consumer, in the digital assets world.

Of course, Turkey is not immune to the global crypto downturn. Paribu’s 2022 research reports the exchange’s daily trade volume at $145 million, down from $850 million in 2021. But still, local enthusiasm remains strong. Turkey’s crypto community is advocating for Devcon, Ethereum’s biggest developer event, to be held in Istanbul.

There have been various mainstream media articles that describe crypto as a refuge from Turkey’s sky-high inflation and the steep devaluation of the lira. The falling lira is a big part of this story, but it doesn’t fully explain crypto’s local appeal. In Turkey, crypto represents a kind of freedom: from the national currency, from the government’s economic policies and even from the constraints of corporate life.

“Crypto is basically a savior for many individuals here both from a financial perspective, and also from a mental perspective,” said Vidal Arditi, the Istanbul-based founder of Layka DAO and Lunapark Web3 Hub.

Currency woes

First, let’s start with the lira. Turkey’s inflation rate recently surpassed 83%, a 24-year high, though some researchers estimate the inflation rate to be significantly higher. The lira also reached a record low against the U.S. dollar amid the government’s unorthodox policy of cutting interest rates. Critics blame the government’s monetary policy for inflation, while the government has pointed to attacks by “foreign financial tools.”

In Istanbul, the pain is real and anecdotes abound. A restaurant’s menu prices increase frequently. Rent jumps five times from one year to the next. It is nearly impossible, I am told, for a local, white-collar worker to buy a house. Even the crypto roller coaster starts to look like a more sound investment strategy. At times the Turkish lira has, in fact, proved to be more volatile than bitcoin.

“Many don’t believe in the power of the Turkish lira, so they are looking for investment opportunities to keep the value of their money,” said Çağla Gül Şenkardeş, founder of Istanbul Blockchain Women.

“Since we are a culture that is quite used to investment alternatives like U.S. dollars or gold, it wasn’t hard for Turkish people to trust another alternative, which is crypto,” she said. “We are quite used to investing in something that is not the lira. We can take risks easily.”

Inflation can make wealth accumulation difficult – even impossible – and this problem is compounded by a lack of other good investment options. Generation Y and the new generation had limited opportunities to invest in companies like Google, Tesla or Facebook, says Tansel Kaya, CEO of Mindstone Blockchain Labs.

“You needed an intermediary to buy those stocks, and even if you could, it was already too late. You could only get them at IPO prices,” he says. Today, by contrast, you can be part of bitcoin or ether’s success.

“Tokens are not a stock, but they still make you part of the project’s success. With crypto, I can get into a seed round, private round or the public initial coin offering.”

Wage gap

Salaries often do not keep up with inflation, meaning earners have decreasing purchasing power. In July Turkey raised the minimum wage for the second time in six months, by 30% to 5,500 lira, which at the time was worth $328. Today, it is already less than $300. Ege Aguş, an engineering student who started investing in crypto when he was 19, also works at a crypto startup while at school.

“Even if you graduate from one of the top engineering schools, the salaries are not high,” he said. “If you work extra, you are not paid for it. I can’t afford to live in some kind of house right now. That’s why we are searching for the easiest way to make money.”

Those who worked in multinational companies also said that Turkish salaries were relatively low. One former Apple employee, who preferred to remain anonymous because of critical views expressed, left Apple to eventually get into crypto. The former Apple employee said this was, in part, because the salary was not enough to offset the devaluation of the lira and the decrease in purchasing power for Turkish employees.

Working in crypto was a more attractive option. “For similar job positions in crypto companies, job benefits and perks were getting better and better. I realized that when I met a friend in a crypto exchange and was offered a job,” the person said. Earning a salary in a different currency like the dollar or in stablecoins such as USDT, USDC or DAI “became a life-saving case for many people.”

The former Apple employee made sure to emphasize, however, that it was more than cash that was the draw to crypto. It was also the mindset.

“My main motivation has not been just money but to be free in expressing my thoughts and not have the pressure of corporate structures.”

Global entry

Some young people, frustrated by these economic realities, will try to leave Turkey to make a life somewhere else. But for those who either can’t or don’t want to leave their homeland, crypto can act as a kind of virtual passport.

“The good thing about working in Web3 is that you can get out of the country without getting out of the country,” Kaya of Mindstone Blockchain Labs said. “Your work is online. I can get projects in the U.S. I can work with freelancers from Serbia and pay them in crypto. If I want to send money over the banking system during the holidays, I have to wait. With crypto, I just click a button and the money is paid.”

For startup founders, the decentralized nature of crypto serves as a gateway to global investors. Levent Cem Aydan, the Turkish-born founder of the blockchain gaming incubator Seedify, said that it can be hard for startups to raise big money from Turkish venture capitalists, and raising money abroad is not straightforward either. Visa issues or the sheer cost of travel can make it difficult for Turkish founders to visit Silicon Valley, for example.

He says that Web3 projects, by contrast, might be able to raise funds through an initial DEX offering (IDO) involving a decentralized crypto exchange, or via non-fungible tokens (NFTs).

“If I want to grow a successful project and I want to go global, the best way is to become a blockchain entrepreneur,” he said.

The state

It might seem surprising that Turkey is relatively permissive toward cryptocurrency, which some governments view as a threat to state control. Turkey ranked at 103 out of 167 countries on the Economist Intelligence Unit’s democracy index in 2021. Just this month, Turkey’s parliament passed a law outlawing the spread of so-called disinformation, sparking the concern of free-speech advocates. And yet, even against this backdrop, crypto remains relatively free.

Yes, Turkey’s central bank banned crypto as a form of payment last year, possibly as a reaction to the falling lira. Otherwise, crypto remains largely unregulated. Even as various countries around the world have cracked down on fundraising through initial coin offerings (ICO), Turks can still participate in them.

One possible reason for this lack of regulation is that the Turkish government simply hasn’t gotten around to it yet. All over the world, crypto moves faster than governments’ attempts to regulate it. But there is another, more intriguing theory circulating in Turkish crypto circles. It’s that the Turkish government hasn’t cracked down on crypto because it recognizes how essential it is for a broad swathe of the population.

There is some evidence that Turkish policymakers are indeed concerned about angering crypto users. Last year a grassroots movement helped disrupt the passage of a controversial crypto bill. The draft bill, which was leaked on social media, aimed to restrict international exchanges in Turkey as well as ban self-custody wallets. Anger erupted online and a meeting about the bill was held at the Parliament. Various members of the crypto community shared their concerns, which seemed to have contributed to the postponement of the bill.

Why would the Turkish government care what crypto users think? One possible reason is the upcoming presidential election next year, which may be the ruling party’s toughest re-election to date. In an election where every vote is important, the government may not want to risk alienating millions of crypto users, some of whom see crypto as a lifeline.

“There are about 8 million individuals who actively invest in crypto. If you consider immediate family members, that’s about 14 million people,” Tansel Kaya said.

“There are all these people who are going to vote for the first time. If the government makes a wrong regulation, the opposition will blame them. If you take away their dreams, these voters will remember it.”