The “Law on Amendments to the Capital Markets Law”, which was adopted by the Turkish Grand National Assembly last week and includes the regulation of crypto assets, was published in the Government Gazette.

The law entered into force upon its publication in the Official Gazette. Thus, the one-month period given to companies that are currently operating as crypto asset service providers to apply for an operating license has started. According to the law, companies that do not apply within this period must take a liquidation decision within three months.

What does the law bring?

First of all, the law does not include tax provisions. While the tax issue is kept outside the scope of this law, it is expected to be clarified in the coming period.

The law defines concepts related to crypto assets. These include “wallet”, “crypto asset”, “crypto asset service provider”, “crypto asset custody service”, “platform” and “TÜBİTAK”. In order for crypto asset service providers to be established and start operating, it is obligatory to obtain permission from the CMB.

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In addition, the obligations of crypto asset service providers to establish the necessary internal control units and systems in order to manage their systems securely are regulated. Compliance with the criteria to be determined by TÜBİTAK is adopted as a condition of activity.

The law lists the conditions to be sought in the partners and managers of crypto asset service providers. In addition, it is regulated that transactions such as trading, initial sale and distribution, as well as clearing, transfer and custody services to be carried out on the platforms will be carried out in accordance with the procedures and principles to be regulated by the CMB.

On the other hand, it is also stipulated that the opinion of TUBITAK shall be taken regarding the determination of technical standards regarding the crypto assets to be traded on the platforms. While the relations between platforms and customers are also regulated, the storage of crypto assets belonging to customers on these platforms is also regulated. According to the law, customers will be able to keep these assets in their own wallets and, if they wish, they can subject them to transactions on crypto asset trading platforms.

The law also stipulates that crypto assets of customers cannot be seized, pledged, included in the bankruptcy estate, or subject to precautionary measures due to the debts of crypto asset service providers.

According to the law, the principles and principles regarding investment consultancy and portfolio management regarding crypto assets will also be determined in secondary regulations. The authority in this regard is again given to the CMB.

The principles regarding the advertisements and announcements of crypto asset service providers will also be established by the CMB. With the authorization of crypto asset service providers by the CMB, the CMB will also issue authorization certificates to these institutions.

The law adds crypto asset service providers to the list of organizations that must be members of the Turkish Capital Markets Association.

The Law stipulates that the CMB will decide on the removal of content and/or blocking access to publications made via the Internet, and that the decision will be sent to the Association of Access Providers for implementation.

The Law also regulates the measures to be applied in the event that investment consultancy and/or portfolio management for crypto assets is carried out in violation of the principles to be determined by the CMB, and that activities are carried out by platforms residing abroad for persons residing in Turkey. Accordingly, the activities of non-resident platforms for residents in Turkey or the provision of a prohibited activity related to crypto assets to residents in Turkey within the scope of the regulations to be made by the CMB are considered as unauthorized crypto asset service provision. In the event of any of the following situations: opening a workplace in Turkey, creating a website in Turkish, engaging in promotional and marketing activities directly or through persons or institutions residing in Turkey regarding the crypto asset services offered by platforms residing abroad, the activity will be deemed to be directed to residents in Turkey.

The liability provision introduced for investment institutions under the provisions of the Capital Markets Law is also introduced for crypto asset service providers. In addition, the law includes market disruptive actions within the scope of cases where measures will be imposed. Accordingly, measures may be imposed on misdemeanor acts and transactions that will disrupt the operation of the stock exchange and other organized markets in trust, openness and stability, as well as activities to be carried out through the internet and social media.

The law prevents the unauthorized activity of crypto asset service providers. The penalty for unauthorized activity will be imprisonment from three to five years.

Embezzlement provisions have also been introduced for the chairman and members of the board of directors and other members of the crypto asset service provider. Thus, it is aimed to prevent irregular transactions for customer assets.

Under the law, crypto asset service providers that are currently operating are required to apply to the board within one month. Crypto asset service providers that will not apply are requested to take a liquidation decision within three months.

The law, which also introduces provisions regarding cryptocurrency ATMs, prohibits these ATMs.