Central Bank ends physical gold conversion scheme

Turkey's central bank has terminated a program allowing individuals to convert physical gold holdings into lira-denominated deposit and participation accounts, marking a significant shift in how citizens can manage their gold assets. The move was formalized through a regulation published in the Official Gazette on August 22, which took immediate effect. This regulation had been in place since March 14, 2022, providing a mechanism for individuals to convert their physical gold into financial instruments backed by the national currency. The termination of this program came after new accounts and renewals under the scheme were suspended on August 23, 2025. However, existing accounts established prior to this date will remain active until they reach their respective maturity dates. This means that individuals who participated in the program before the suspension will continue to benefit from the terms outlined in the previous regulations until their accounts expire. Under the former rules, participants could bring their physical gold to authorized jewelers or bank branches to transfer it into gold accounts. These accounts functioned similarly to traditional savings accounts, offering returns based on either fixed interest rates or profit-sharing mechanisms. The value of the gold deposited was converted into Turkish liras using a rate determined by the Central Bank. The converted funds were then placed into deposit or participation accounts with varying maturities, three, six, or twelve months. During this period, banks would sell the equivalent amount of gold to the Central Bank at the specified conversion rate. Upon reaching the end of the account's term, participants received their initial investment along with accrued interest or profit shares. In cases where the market price of gold increased beyond the return offered by the account, the Central Bank was responsible for compensating the difference through the associated bank. Additionally, the program included provisions for an extra return, governed by specific guidelines issued by the Central Bank itself. This change follows a broader trend of regulatory adjustments aimed at managing economic stability and controlling inflation within Turkey. The Central Bank has been actively reviewing its policies to ensure alignment with current economic conditions and to prevent potential distortions in the financial markets. By ending the physical gold conversion scheme, the institution seeks to streamline its operations and reduce complexities arising from fluctuating gold prices and currency values. The impact of this decision extends beyond individual investors, affecting financial institutions and the overall structure of the country's monetary policy. Banks that previously facilitated these conversions will need to adjust their services accordingly, potentially redirecting resources towards other forms of financial products and services. Meanwhile, the Central Bank aims to maintain confidence in the domestic financial system by ensuring transparency and consistency in its regulatory framework. As the economy continues to evolve, the Central Bank's actions reflect ongoing efforts to adapt to changing economic landscapes. With the termination of the physical gold conversion scheme, the focus shifts toward developing alternative strategies that support both investor interests and macroeconomic stability. The coming months will likely see further developments as stakeholders assess the implications of this regulatory change and explore new avenues for managing wealth in a dynamic economic environment.