The effect of currency risk on crypto asset utilization in Türkiye

Nico Oefele; Dirk G. Baur; Lee A. Smales

doi:10.1016/j.ememar.2025.101264

The effect of currency risk on crypto asset utilization in Türkiye

Nico Oefele, Dirk G. Baur, Lee A. Smales

Research output: Contribution to journal › Article › peer-review

Abstract

This study is the first to systematically examine the impact of currency risk on crypto asset utilization in an emerging market, using Turkish lira-denominated crypto trading volume as a proxy. Our findings highlight the dominance of a single exchange and the sustained growth of stablecoin trading. Daily trading volume is largely driven by global crypto market capitalization. However, we find no systematic link between trading volume and significant lira depreciations, inflation shocks, or policy rate changes. Contrary to policymakers' concerns about domestic currency substitution with crypto assets, our results suggest only weak, short-lived evidence related to currency risk in Türkiye.

Original language	English
Article number	101264
Number of pages	16
Journal	Emerging Markets Review
Volume	65
Early online date	15 Feb 2025
DOIs	https://doi.org/10.1016/j.ememar.2025.101264
Publication status	Published - Mar 2025

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10.1016/j.ememar.2025.101264Licence: CC BY

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title = "The effect of currency risk on crypto asset utilization in T{\"u}rkiye",

abstract = "This study is the first to systematically examine the impact of currency risk on crypto asset utilization in an emerging market, using Turkish lira-denominated crypto trading volume as a proxy. Our findings highlight the dominance of a single exchange and the sustained growth of stablecoin trading. Daily trading volume is largely driven by global crypto market capitalization. However, we find no systematic link between trading volume and significant lira depreciations, inflation shocks, or policy rate changes. Contrary to policymakers' concerns about domestic currency substitution with crypto assets, our results suggest only weak, short-lived evidence related to currency risk in T{\"u}rkiye.",

keywords = "Crypto asset, Cryptoization, Currency substitution, Dollarization, Emerging market, Financial stability, Stablecoin",

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AU - Oefele, Nico

AU - Baur, Dirk G.

AU - Smales, Lee A.

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N2 - This study is the first to systematically examine the impact of currency risk on crypto asset utilization in an emerging market, using Turkish lira-denominated crypto trading volume as a proxy. Our findings highlight the dominance of a single exchange and the sustained growth of stablecoin trading. Daily trading volume is largely driven by global crypto market capitalization. However, we find no systematic link between trading volume and significant lira depreciations, inflation shocks, or policy rate changes. Contrary to policymakers' concerns about domestic currency substitution with crypto assets, our results suggest only weak, short-lived evidence related to currency risk in Türkiye.

AB - This study is the first to systematically examine the impact of currency risk on crypto asset utilization in an emerging market, using Turkish lira-denominated crypto trading volume as a proxy. Our findings highlight the dominance of a single exchange and the sustained growth of stablecoin trading. Daily trading volume is largely driven by global crypto market capitalization. However, we find no systematic link between trading volume and significant lira depreciations, inflation shocks, or policy rate changes. Contrary to policymakers' concerns about domestic currency substitution with crypto assets, our results suggest only weak, short-lived evidence related to currency risk in Türkiye.

KW - Crypto asset

KW - Cryptoization

KW - Currency substitution

KW - Dollarization

KW - Emerging market

KW - Financial stability

KW - Stablecoin

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The effect of currency risk on crypto asset utilization in Türkiye

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