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A key driver of the Turkish financial sector has been the county’s robust economy with a bright future. Over the past 16 years, the Turkish economy has been growing at an average annual real GDP growth rate of 5.5 percent, and the growth momentum is expected to continue. Turkey’s sizeable and diversified economy has achieved remarkable growth, and became the 13th largest economy in the world in 2018.
Turkey’s economic expansion has resulted in income growth and a burgeoning middle-class with increasing purchasing power.
Turkey introduced business-friendly policies, including one of the most effective and respected regulatory financial regimes, balancing a strict but reasonable licensing process to safeguard reputation with a competitive offer, favorable taxation, and banking infrastructure to support the sector.
Currently, it is possible to start a cryptocurrency exchange without a license elsewhere. Actually, some of the world’s largest crypto exchanges are not regulated. Turkish government has begun to prepare for new legislation. Cryptocurrency exchange companies and other virtual asset service providers will need a licence to operate in Turkey. Before the legal requirement, the corporations who have already operated in Turkey will have a great advantage.
Instead of just alerting of risks and putting the brakes to companies innovating in the financial sector, Turkey is preparing to take the bull by its horns and has done its homework with the introduction of a specific regulatory framework for blockchain companies, including exchanges, that are settled in Turkey.
With a government that has publicly expressed its preparation and willingness to attract the blockchain and crypto industry and having enacted its correspondent legal framework and its pro-business environment, there may not be jurisdictions more attractive than Turkey for blockchain companies that are seeking to be regulated and are looking to do business in a sound and safe jurisdiction.
In addition to reducing regulatory uncertainty, Turkey’s regulated exchanges will enjoy three major benefits: legitimacy with consumers, access to financial services and reasonable taxation.
Legitimacy, Transparency and Competitive edge in Turkey
Unfortunately, bad practices, market manipulation, and hacks have been common in exchanges.
Considering the current situation, the fact of being regulated and subject to regular controls, audits, and transparency requirements will help the sector gain legitimacy with customers and attract institutional money, not only providing a competitive edge over other exchanges but also establishing industry standards and gaining the needed confidence to boost this industry to mass adoption.
Taxes in Turkey
Turkey is not a tax-free jurisdiction but its taxation is relatively low and reasonable.
Exchanges incorporated in Turkey will be subject to a 22% corporate income tax. However there are many exemption in corporate income tax regime for foreign investors.
In addition, there are several tax incentives available for certain qualified startups like being able to claim 100% of their eligible capital allocations in the first year of operation. In addition, for certain start-ups, there are also tax credits available for social security contributions.
Requirements
Establishing your business in Turkey means having a real presence in the territory. To obtain the license, you will need to establish an office with real activity and the effective place of business management and decision making must also be in Turkey meaning the management team must reside there.
There is no licence requirement yet. However it is expected that you have in place adequate IT systems for risk management, protection of the client’s assets and security systems, KYC and prevention of money laundering and financial crime, data protection, and high-standard security access protocols in order to work with licenced Turkish banks.
The background of the promoters and managers of the exchange will be taken into account with a due diligence procedure to ensure that the team is made up of honest, skilled and experienced staff, as well as having adequate legal support, to carry out the business without diminishing the reputation of the jurisdiction.
Financial Instruments
It is important to note that even if you have digital assets that are going to be traded in your exchange, you may need to obtain any licenses yet. For instance, establishing a platform to trade instruments such as bitcoin derivatives, or security tokens which may require obtaining a license. However, Turkish Financial Crime Investigation Board and Capital Markets Board are related governmental organizations..
We can help you
If you are planning to establish your regulated cryptocurrency exchange in Turkey we here at Finahukuk can help you. From company incorporation to the entire license application process, review of the business plan, bank account opening to assist in the development of data protection policies, T & C’s, compliance, contracts and support for the physical establishment in Turkey we’ve got you covered.
We can also help you compare other available options that may be more suited to your needs and situation. Contact us, it will be a pleasure to serve
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