Vedant Sahu
In a significant move towards providing clarity and regulation in the cryptocurrency space, the Turkish government is on the verge of finalizing a comprehensive framework for crypto assets and trading platforms. The impending regulations, outlined by Turkey’s Minister of Treasury and Finance, Mehmet Şimşek, aim to establish legal definitions for key crypto concepts, introduce licensing requirements for trading platforms, and align with international standards set by the Financial Action Task Force (FATF).
Herein, we explore the key highlights of Turkey’s forthcoming crypto regulations and their potential impact on the country’s growing crypto market.One of the primary objectives of Turkey’s cryptocurrency regulations is to mitigate the risks associated with crypto trading, with a particular focus on safeguarding ordinary investors. To achieve this, the regulations will provide clear legal definitions for essential crypto-related terms such as “crypto assets,” “crypto wallets,” and “crypto asset service providers.” By defining these terms, the government aims to create a more transparent and secure environment for crypto transactions.
Under the proposed framework, crypto trading platforms operating in Turkey will be required to obtain licenses from the Capital Markets Board (CMB). These licenses will come with operational requirements that are akin to those imposed on traditional financial institutions. This approach is designed to enhance the security and reliability of crypto platforms, reducing the potential for abuse and extreme price fluctuations.
While the regulations establish a comprehensive framework for crypto trading, they do not address the specific taxation of virtual assets at this stage. Instead, the focus is on providing regulatory clarity and setting the stage for a secure crypto ecosystem in Turkey. The government’s approach is to ensure that crypto assets are defined as intangible assets created and stored electronically using distributed ledger technology or similar methods, distributed over digital networks, and capable of representing value or rights.
Turkey’s journey towards cryptocurrency regulation began in May 2022, and the country has made significant progress since then. In early November 2023, Minister Şimşek announced the impending crypto legislation, highlighting that Turkey had already achieved compliance with 39 out of 40 FATF standards. This move is crucial for Turkey as it seeks to exit the FATF’s “grey list,” a designation it has held since 2021. Being on this list has had adverse effects on investor confidence in Turkey’s economy, which has been strained by high inflation rates.
Amidst economic challenges, cryptocurrencies have gained popularity in Turkey as an alternative financial option. Chainalysis, a blockchain analytics firm, reported that Turkey ranked fourth globally in crypto transaction volumes between July 2022 and June 2023, with approximately $170 billion in crypto activity. This places Turkey behind only the United States, India, and the United Kingdom in terms of crypto trading volume.
Turkey’s imminent comprehensive crypto regulation framework is poised to bring transparency, security, and regulatory clarity to the country’s burgeoning crypto market. By defining crucial terms, introducing licensing requirements, and aligning with international standards, Turkey aims to protect investors and enhance its standing in the global crypto landscape. As cryptocurrencies continue to gain traction in Turkey, these regulations are expected to play a pivotal role in shaping the future of crypto assets within the nation.