As per the Medium-Term Program for the years 2023 through 2025 by the Ministry of Treasury and Finance and the Presidential Strategy and Budget Directorate, the Crypto Assets Bill was submitted to the Turkish Grand National Assembly (the Turkish Parliament) on 16 May 2024 as the Bill on Amendments to the Capital Markets Law (the Bill).

Though several regulations are currently in force, the Bill is Türkiye’s most detailed regulation regarding crypto assets.

Regulations that Are Currently in Force

Regulation on the Prohibition of Using Crypto Assets in Payments

This regulation prohibited using crypto assets for payments. However, it limits the freedom of contract and is thus controversial in its conformity with the Constitution. It is also contentious regarding the applicability, as it does not consider the rule that a valid payment of a monetary debt requires payment in an official currency and ignores the current regulations regarding electronic money institutions.

Regulation Amending the Regulation on Measures to Prevent Laundering the Proceeds of Crime and Financing of Terrorism

With this regulation, crypto asset service providers had become one of the organizations responsible for implementing the Law on the Prevention of Laundering the Proceeds of Crime.

Tax Procedure Law General Communiqué

With this communiqué, crypto asset service providers had become obliged to submit the ultimate beneficial owner information declaration to the Revenue Administration.

Financial Crimes Investigation Board General Communiqué

With this communiqué, crypto asset service providers had become obliged to take measures to determine whether the customer or the ultimate beneficial owner was a person of public influence.

As can be seen, these regulations aim to prevent financial crimes and do not include general rules that regulate the crypto assets market.

The Bill’s Scope: Which Crypto Assets?

Crypto assets falling under the scope of the Bill are:

• Crypto assets that provide rights specific to capital market instruments,
• Crypto assets, for which the Capital Markets Board (the CMB) determines the principles for sale or distribution on the platforms,
• Other crypto assets on the platforms.

Highlights from the Bill

The Bill:

• Defines the terms of wallet, crypto asset, crypto asset service provider, crypto asset custody service, and platform;
• Envisages the possibility of issuing capital market instruments as crypto assets;
• Introduces an obligation for all local and foreign crypto asset service providers, including platforms established abroad, to obtain operation license;
• Determines the criteria for the controlling shareholder, natural person and legal entity shareholders, board members, and representatives of crypto asset service providers;
• Envisages that the Scientific and Technological Research Council of Türkiye will determine the criteria regarding the information systems and technological infrastructures of crypto asset service providers;
• Draws the framework for the supervision of crypto asset service providers and the measures and sanctions, including blocking access to their websites, that the CMB may apply to them;
• Stipulates operating as a crypto asset service provider without a license as a crime and regulates the crime of embezzlement specifically for crypto asset service providers;
• Draws the general framework for the activities of crypto asset service providers and the transfer and custody of crypto assets;
• Envisages that judicial or administrative institutions may apply measures such as the electronic seizure of crypto assets;
• Leaves secondary regulations regarding the above provisions’ details to the CMB and similar issues, such as trading, initial sale or distribution, exchange, transfer, or custody of crypto assets through platforms, or investment consultancy or portfolio management for crypto assets.

First Impressions

Although the Bill contains detailed regulations, considering the rules in force, it is not as comprehensive and clear-cut as the European Union’s Regulation on Markets in Crypto-Assets or the United States’ Financial Innovation and Technology for the 21st Century Act.

Another critical issue is that the Bill leaves too much regulatory authority to the CMB, which may raise claims of unconstitutionality. Similarly, the rule authorizing the CMB to decide to block access to a crypto asset service provider’s website instead of a court order may lead to additional discussions of unconstitutionality.

Nevertheless, the Turkish Parliament can address the deficiencies during the discussions in the parliament, and the CMB can clarify the details with secondary regulations. However, to ensure legal predictability, the secondary regulations must be completed within six months from the entry into force of the Bill, as envisaged by the Bill, without any time extension.

Winners and Losers

Tech Savvies

Tech savvies who conduct peer-to-peer crypto asset transactions and do not use any crypto asset services for trading, transfer, or custody seem to neither win nor lose.

Investors Using Crypto Asset Exchanges

Investors seem to be among the winners, considering the scams in the crypto assets market. However, they must ensure they receive services from crypto asset exchanges with licenses from the CMB.

On the other hand, transaction fees that crypto asset exchanges charge investors will likely increase as crypto asset exchanges pass on regulatory compliance costs to customers.

Another development expected for investors following the Bill may be applying withholding tax, exchange tax, or similar taxes to crypto asset trading transactions carried out on crypto asset exchanges.

Domestic Crypto Asset Exchanges

Some domestic exchanges seem to be among the winners, and some seem to be among the losers.

The winners are the corporate exchanges that incorporate companies in Türkiye, have sufficient capital, and invest in the latest technologies. There are even those who design their systems like an investment firm from the very beginning.

The losers are those who operate with questionable shareholders and capital structures or, worse, those who operate entirely online without even incorporating a company.

Foreign Crypto Asset Exchanges

Foreign exchanges also seem to be among the losers. The Bill may be a negative development for them because some do not prefer to obtain any license, even in their own countries, and move to countries without license requirements.

We need to wait and see whether these exchanges will apply for a license in Türkiye, and if they do not, how the relevant institutions will enforce the administrative or criminal sanctions other than blocking access to their websites.

Those Who Hide Assets from Their Spouses, Reserved Heirs, or Creditors

These are definitely among the losers!

The Bill does not bring good news for those who hold crypto assets to hide their assets from the liquidation of the matrimonial property regime in a possible divorce case or from their reserved heirs (spouse, children, mother, or father) in case of death.

A similar outcome also applies to those who hold crypto assets to hide their assets from their creditors because, with the Bill, electronic seizure of the crypto assets becomes possible.

So, let’s see if the Bill will pass the Turkish Parliament as is, or will some amendments be made?

Av. Müge Önal Başer, LL.M., LL.B.

References

1. Constitution of the Republic of Türkiye No. 2709 (Official Journal (OJ), 20 October 1982, No. 17844).
2. Enforcement and Bankruptcy Law No. 2004 (OJ, 19 June 1932, No. 2128).
3. Law No. 6183 on the Collection Procedure of Public Receivables (OJ, 28 July 1953, No. 8469).
4. Law No. 5549 on the Prevention of Laundering the Proceeds of Crime (OJ, 18 October 2006, No. 26323).
5. Turkish Code of Obligations No. 6098 (OJ, 04 February 2011, No. 27836).
6. Capital Markets Law No. 6362 (OJ, 30 December 2012, No. 28513).
7. Law No. 6415 on the Prevention of Financing of Terrorism (OJ, 16 February 2013, No. 28561).
8. Law No. 6493 on Payment and Securities Reconciliation Systems, Payment Services, and Electronic Money Institutions (OJ, 27 June 2013, No. 28690).
9. Decree on Approval of the Medium-Term Program (2023-2025) No. 6003 (OJ, 04 September 2022, No. 31943 1st Duplicate).
10. Regulation on the Prohibition of Using Crypto Assets in Payments (OJ, 16 April 2021, No. 31456).
11. Regulation No. 3941 Amending the Regulation on Measures to Prevent Laundering the Proceeds of Crime and Financing of Terrorism (OJ, 01 May 2021, No. 31471).
12. Tax Procedure Law General Communiqué No. 529 (OJ, 13 July 2021, No. 31540).
13. Financial Crimes Investigation Board General Communiqué No. 21 (OJ, 17 November 2022, No. 32016).
14. Bill No. 2/2162 dated 16 May 2024 on Amendments to the Capital Markets Law, https://cdn.tbmm.gov.tr/KKBSPublicFile/D28/Y2/T2/WebOnergeMetni/f581b54c-5b4b-4bce-8e34-25944f1fdee3.pdf (last visited 25 June 2024).
15. Planning and Budget Commission Report No. 126 Regarding Bill No. 2/2162 on Amendments to the Capital Markets Law, https://cdn.tbmm.gov.tr/KKBSPublicFile/D28/Y2/T2/DosyaKomisyonRaporunuVerdi/9ff21c5d-aa19-46f5-aa27-84c1a840283e.pdf (last visited 25 June 2024).
16. Regulation (EU) 2023/1114 of the European Parliament and of the Council of 31 May 2023 on Markets in Crypto-Assets, and Amending Regulations (EU) No 1093/2010 and (EU) No 1095/2010 and Directives 2013/36/EU and (EU) 2019/1937, 09 June 2023, https://eur-lex.europa.eu/eli/reg/2023/1114/oj (last visited 25 June 2024).
17. H.R.4763, An Act to Provide for a System of Regulation of Digital Assets by the Commodity Futures Trading Commission and the Securities and Exchange Commission, and for Other Purposes (Financial Innovation and Technology for the 21st Century Act), 22 May 2024, https://www.congress.gov/bill/118th-congress/house-bill/4763/text (last visited 25 June 2024).
18. Onal Baser, Muge: “Cryptocurrency Holders’ Rights Under Turkish Private Law: Do We Need New Laws or Regulations?,” Baku State University Law Review 2021, V. 7, I. 2, p. 146-167.
19. See also, Önal Başer, Müge: “Can Cryptocurrencies be ‘Paid in’ as Capital Contribution?”, December 2020, https://www.mugeonal.com/can-cryptocurrencies-be-paid-in-as-capital-contribution; Önal Başer, Müge: “Environmental Impact of Rising Technologies: Are Electric Vehicles, Cryptocurrencies, Artificial Intelligence, and Similar Technologies Guilty or Not Guilty?”, December 2021, https://www.mugeonal.com/environmental-impact-of-rising-technologies-are-electric-vehicles-cryptocurrencies-artificial-intelligence-and-similar-technologies-guilty-or-not-guilty; Önal Başer, Müge: “What Do Recent Regulations and Court Judgments About Cryptocurrencies Tell Us?”, September 2023, https://www.mugeonal.com/what-do-recent-regulations-and-court-judgments-about-cryptocurrencies-tell-us.