New Turkish Cryptocurrency Law Draft

What Does the New Turkish Cryptocurrency Law Entail?

Expected regulation of the cryptocurrency ecosystem has been under preparation for months. As the government gives the start signal, it will soon be presented before the Grand National Assembly of Turkey. The cryptocurrency law in Turkey will be enacted by adding certain provisions to the Capital Market Law and leaving the details to sub-regulations. So, what will these regulations entail?

How Many Types of License?  

First of all, three types of license exist. The first one is the license that will be granted to cryptocurrency service providers, the second one is the storage license and the third one is the independent audit authorization.

Operating as a cryptocurrency service provider in Turkey will be subject to the permission of the Capital Markets Board of Turkey (“CMB”). The CMB will regulate the conditions and details for authorization of these activities with a secondary legislation. A significant minimum threshold of capital requirement is expected in the Sub-Communiqué. Here, we will see the conditions set forth in any financial regulations again such as the obligation of establishing joint stock company for prospective companies, training criteria for managers, the obligation of having necessary financial power and not being related to certain crimes for certain shareholder partners.  

What Will Happen to Unlicensed Companies?

Advertising activities and websites of the unlicensed companies will be restricted. Interesting part is that the non-operating companies at the effective date of the law will not be able to operate until obtaining the permission. We have already seen this outcome in Factoring-Leasing, Electronic Money and Forex legislation.

Rule of Great Wall of China

Provision about the fact that the fiat money collected from the customers in cryptocurrency exchanges should not be mixed with companies’money – Great Wall of China Rule- has been set forth under the regulations. In addition, as is the case with electronic money institutions, the new regulation will entail the obligation of keeping the related TL funds within the banks in the same manner. Although there is no regulation providing that the interest cannot be accrued for these assets, we will see the details in the Communiqués.

Speaking of storage, it should be noted that working with authorized-licensed storage institutions about the storage of cryptocurrencies is on the table. It is noteworthy that some banks, which extremely stay away from cryptocurrency exchanges! already started their preparations in order to obtain the license.

 Will We Not Be Able to Withdraw Cryptocurrencies To Our Wallet?

The most controversial issue in the regulations is that the CMB will be providing rules regarding the transfer of cryptocurrencies. Here, prohibition of the transfer from a cryptocurrency exchange to an unlicensed cryptocurrency exchange or to one’s personal digital wallet is at stake. This is a very controversial debate. Although the application of this prohibition will be difficult in practice, it can be interpreted as an effort of the state to dominate the cryptocurrency ecosystem completely.

One of the good news is that the securitization-tokenization will be possible from now on. Security Token Offerings (“STOs”) will be legalized. Therefore, the tokenization of power plants will be possible! As Finahukuk, we are happy that we will be able to give regulation support to STOs projects in Turkey as well, as we already did for several times in Canada, Singapore, Saudi Arabia and Estonia.

Prohibited/Authorised Cryptocurrency

Capital Markets Board of Turkey will be authorized to determine which cryptocurrencies will be listed. Therefore, cryptocurrencies such as monero and zdash will be banned. Likewise, the CMB will be authorized to determine the transaction limits regarding the cryptocurrencies.

How Will the Foreign Cryptocurrency Exchanges Act If the Transfer to These Exchanges Is Prohibited?

According to the Law, these institutions will obtain the license from the beginning or they will execute an agreement with a cryptocurrency exchange located in Turkey. Therefore, problems about obtaining information will be avoided.

Leveraged Trading?

Leveraged trading will be prohibited completely and will be identified as an illegal transaction.

Liability of Those Who Expose Their Exchange to Cyber Attack

Company officials will be subject to personal liability for cyber security on an exclusive basis. It means that: “If you cannot provide protection, stop operating your activities”.

Staking, ICO, DEFI, NFT

A separate regulation for NFT and DeFi is not expected. It does not mean that they are prohibited. However, staking and ICOs will be regulated under Sub-Communiqués.

As well as cryptocurrency law in Turkey, the regulation is discussed around the world. You can check our latest article.