With the Law ("Law") No. 7518 on the Amendment of the Capital Markets Law published in the Official Gazette No. 32590 dated July 2, 2024, provisions regarding crypto assets, which have been on Türkiye's agenda for a long time, have entered into force.
In the general preamble submitted to the Grand National Assembly of Türkiye for the law proposal, it is stated that the use of crypto assets, which are stated to differ significantly from the assets in the current financial system in terms of various features with the opportunities brought by technologies such as blockchain and encryption, has become exponentially widespread both globally and nationally, and that in parallel with international examples, the platforms in our country should also be regulated, and that the law in question aims to regulate not the blockchain technology, but the trading activities of crypto assets on the platforms.
In this context, the Law amended the Capital Markets Law ("CML") on the following key issues:
- The Law introduced definitions of wallet, crypto asset, crypto asset service provider, crypto asset custody service and platform. Crypto assets are broadly defined as "intangible assets which can denote value or rights that can be created and stored electronically using distributed ledger technology or a similar technology, distributed over digital networks", and crypto asset custody service providers are broadly defined as "platforms, crypto asset custody service providers and other organizations designated in the regulations to be made based on this Law [CML] to provide services in relation to crypto assets, including the initial sale or distribution of crypto assets".
- The Law introduced provisions on crypto asset service providers and crypto assets as well as provisions on the activities of crypto asset service providers and the principles regarding the transfer and custody of crypto assets. It has become mandatory for crypto asset service providers to obtain authorization from the Capital Markets Board ("Board") for their establishment, operation and share transfers. When granting authorization to the activities in question, the Board will take into account the criteria to be determined by Scientific and Technological Research Institution of Türkiye ("TÜBİTAK") regarding information systems and technological infrastructures and the opinions of other necessary institutions and organizations.
- The Board is authorized to determine the principles regarding the issuance of capital market instruments as crypto assets and dematerialization in the electronic environment offered by crypto asset service providers and to require integration between the electronic records and the Central Securities Depository of Türkiye system when necessary.
- Crowdfunding platforms and crypto asset service providers have been listed among parties that are required to apply to become a member of the Turkish Capital Markets Association.
- In cases where it is determined that unauthorized capital market activities are carried out through the internet, the Board will issue a content removal and/or access blocking decision regarding the said publications and send it to the Access Providers Association for implementation.
- The Law also introduced measures to be applied in the activities of crypto asset service providers and supervision of crypto asset service providers and sanctions to be imposed.
- Unauthorized crypto asset service provider activity, embezzlement crimes in crypto asset service providers have been listed among capital market crimes, and personal liability in relation to crypto assets and special investigation procedure for the crime of embezzlement of crypto assets have been provided.
- Each year, excluding the interest income of the previous year, one percent of all revenues of the platforms will be paid to the Board and one percent will be paid to the TÜBİTAK budget to be used in the development of blockchain and related information technologies until the end of May of the relevant year and recorded as income. Other principles regarding these payments will be determined by the Board.
What will happen next?
Pursuant to Provisional Article 11 of the Law, secondary regulations to implement the relevant amendments will enter into force within six months.
- Crypto asset service providers resident outside of Türkiye are obliged to terminate their activities for Turkish residents within three months.
- Those already operating as crypto asset service
providers in Türkiye:
- If they wish to continue their activities, they must apply to the Board within one month with the necessary documents and apply for an operating license.
- In case of failure to apply for an operating license, the relevant companies are required to take a liquidation decision within three months and submit a declaration that they will not take on new customers during this period.
- The activities of ATMs and similar electronic transaction devices located in Türkiye that allow customers to convert crypto assets into cash or cash into crypto assets and to transfer crypto assets must be terminated within three months from the date of entry into force of the Law. ATMs that do not terminate their activities will be closed by the competent authorities.
- Income records to the budget of the Board and TÜBİTAK based on platform revenues will start to be recorded in 2025 based on 2024 revenues.
Following the publication of the Law in the Official Gazette, the Board published its first announcement on July 2, 2024.
In this announcement, in line with Provisional Article 11, important dates regarding the actions to be taken in the upcoming period are specified and it is underlined that sanctions will be imposed if the relevant actions are not taken. In this context, the following dates are noteworthy for crypto asset service providers in the first phase until the secondary regulations are put into effect:
August 2, 2024: Deadline for the application to be submitted to the Board by persons who are willing to carry out crypto asset service provider activities and who are willing to continue
August 2, 2024: Deadline for crypto asset service providers who are not willing to continue their operations in Türkiye to take the decision for liquidation
October 2, 2024: Deadline for crypto asset service providers resident outside of Türkiye to terminate their activities for Turkish residents
October 2, 2024: Deadline by which the activities of ATMs and similar electronic transaction devices located in Türkiye that allow customers to convert crypto assets into cash or cash into crypto assets and to transfer crypto assets must be terminated
Originally published 10 July 2024.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.