The Bill on the Amendment of the Capital Markets Law, which includes regulations on crypto assets, was passed by the Turkish Grand National Assembly and became law.

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

Defining the terms related to crypto assets, introducing the obligation to obtain permission from the CMB

The law defines terms related to crypto assets. These include “wallet”, “crypto asset”, “crypto asset service provider”, “crypto asset custody service”, “platform” and “TUBITAK”. In order for crypto asset service providers to be established and begin operations, it is obligatory to obtain authorisation from the CMB.

In addition, the obligations of crypto asset service providers to establish the required internal control units and systems in order to manage their systems securely are regulated. Compliance with the criteria to be determined by TUBITAK (Scientific and Technological Research Council of Turkey) 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 to be carried out on platforms, as well as clearing, transfer and custody services will be carried out in accordance with the procedures and principles to be regulated by the CMB.

Opinion provision from TUBITAK in determining the standards for assets to be traded

On the other hand, it is also regulated to obtain the opinion of TUBITAK on 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 legislates that the crypto assets of the customers cannot be seized, pledged, included in the bankruptcy estate, and no precautionary measures can be placed on them due to the debts of crypto asset service providers.

The CMB will determine the principles and guidelines for investment advisory and portfolio management

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

Principles regarding the advertisements and announcements of crypto asset service providers will also be established by the CMB. With the authorisation of crypto asset service providers by the CMB, the issuance of an authorisation certificate to these institutions by the CMB is also regulated.

The law adds crypto asset service providers to the list of organisations that are obliged to be members of the Turkish Capital Markets Association.

It is regulated 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.

Platforms based abroad…

The Law also regulates the measures to be applied in case of investment advisory and/or portfolio management for crypto assets in violation of the principles to be determined by the CMB, and the activities carried out by platforms residing abroad for residents 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 unauthorised crypto asset service provision. In the case of opening a workplace in Turkey, creating a website in Turkish, engaging in promotional and marketing activities directly or through persons or institutions resident in Turkey in relation to the crypto asset services offered by platforms residing abroad, the activity will be deemed to be directed to residents in Turkey.

Prevention of market distorting actions

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 distorting actions within the scope of cases where measures will be applied. With this, measures can be applied to misdemeanour acts and transactions that will distort the operation of the stock exchange and other organised markets in trust, openness and stability, as well as activities to be carried out through the internet and social media.

Up to five years imprisonment for unauthorised activity

The law prevents unauthorised crypto asset service provider activity. The penalty for the offence of unauthorised 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.

Crypto asset service providers currently operating under the law 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.