Turkey plans to set up a central custodian bank for cryptocurrencies to prevent exchanges from running away and tying up funds

Turkish authorities are planning to set up a central custodian for crypto assets, aiming to eliminate counterparty risk for cryptocurrencies, an unnamed government official said, according to Bloomberg. At the same time, the Turkish government is also planning to establish capital thresholds for exchanges and require executives to have a degree of knowledge of cryptocurrency fundamentals in order to improve the quality of operations and reduce risks in the country's cryptocurrency exchanges. The so-called counterparty risk refers to the default or bankruptcy of one of the parties of the transaction, resulting in the promise of the transaction can not be fulfilled; In the Turkish case, Thodex and Vebitcoin collapsed and suspended trading, leaving up to $10 billion in user funds stranded. It's been a turbulent few weeks in Turkey, with the country's central bank banning payment providers from directly or indirectly providing crypto-asset related services, causing the local legal lira to depreciate by 1.25%. Then, local cryptocurrency exchanges Thodex and Vebitcoin suspended trading without warning, causing panic among investors. The Turkish government also said it would introduce cryptocurrency regulations as soon as possible.

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Turkish Financial Crimes Investigation Committee (MASAK) quickly stepped in and 62 people were arrested at Thodex alone at the two closed exchanges. Vebitcoin's CEO was also detained. Thodex founder Faruk Fatih Ozer, however, has fled to Albania and remains missing despite the arrest today of two accomplices who helped her escape.

Ozel, 27, went so far as to release a statement at the time of the incident, stressing that the company would not victimize any of its users and calling the allegations baseless, before deleting his social media accounts and fleeing the country.

Vebitcoin used global crypto hosting and security service giant BitGo to promote itself as a partner of BitGo in Turkey. Now a Spokesperson for BitGo has come out and said that the company's insurance coverage does not cover Vebitcoin's potential losses. In other words, Vebitcoin users have no recourse." It remains to be seen whether the Turkish government will be able to stop the bleeding in time and get their savings back to the victims of the Turkish storm, which has affected more than 390,000 investors and tied up nearly $10 billion.