Turkey plans central custodian bank following digital currency exchange fraud

Authorities in Turkey are reportedly planning to set up a central custodian bank for holding digital assets, following a number of arrests at some of the country’s digital currency exchanges in recent days.

After employees were arrested at Turkish exchanges Vebitcoin and Thodex over the past week in connection with fraud allegations, senior government officials have said they are considering establishing a centralized authority to tackle counterparty risk in digital currency transactions.

The same anonymous official also said the government was investigating whether to institute a capital threshold for digital currency exchanges, as well as new rules that could require crypto executives to have a baseline understanding of digital currencies and other digital assets, according to a Bloomberg report.

The news comes following the high profile disappearance of Faruk Fatih Özer, owner of Thodex, who is thought to have fled to Albania as part of an exit scam reported to have cost some 390,000 exchange users a total of $2 billion.

Law enforcement agents are holding 62 people in connection with the exchange, which has since frozen all trading and withdrawals on its platform. An international arrest warrant has been issued for Özer, which has already seen raids and associated arrests at properties in Albania. However, for now, the exchange owner remains at large.

Similar fraud allegations have fallen on Vebitcoin, with a number of arrests already made of those connected to the exchange, including CEO İlker Baş.

The Turkish Financial Crimes Investigation Board has already intervened to block bank accounts linked to the exchange, and has begun investigations into alleged fraud at the company.

The arrests follow the appointment of a new central bank governor, Şahap Kavcıoğlu, who vowed to take a tougher line on digital currencies in the country, effectively amounting to a ban on the use of digital currency for payments in Turkey.

Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups—from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift, Coinbase, Ripple and Ethereum—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.