Innovatıons Introduced Under The Crypto Assets Law
A. INTRODUCTION
In response to the rapidly increasing popularity of digital assets in recent years, Turkey has decided to strengthen its regulations in this field. In line with this decision, the new Crypto Assets Law, which has recently come into effect, aims to reshape the legal framework regarding cryptocurrencies and other digital assets in our country. This information note aims to assist in understanding the key points of cryptocurrency regulations in Turkey.
B. CRYPTO ASSETS
- Definition & Scope
Crypto assets can be defined as digital currencies that can be electronically transferred, stored, or traded. They generally have a decentralized nature and are supported by distributed ledger technologies such as blockchain. The most popular example is Bitcoin, but there are also other cryptocurrencies like Ethereum and Litecoin.
Cryptocurrencies are typically built on a technological infrastructure called blockchain, where assets are securely transacted. This technology enables secure and transparent ownership of assets, as well as their secure and transparent transfer or use in trade.
- The Crypto Assets Law
Like many countries, Turkey is striving to regulate crypto assets through legal frameworks and create a secure environment in this area. The rapid spread and popularity of crypto assets, their operation outside traditional financial systems, and their use as investment instruments have drawn the attention of regulatory authorities. In order to protect the rights of companies and users operating in this field, prevent fraud, and ensure the healthy functioning of the market, the necessity of introducing legal regulations has arisen.
In line with these efforts to enhance the reliability of the crypto asset market and ensure that companies operate in compliance with the law, the Law Amending the Capital Markets Law (“Crypto Assets Law”) was published in the Official Gazette on 02.07.2024 and entered into force. With the Crypto Assets Law, amendments were made to the Capital Markets Law No. 6362 dated 06.12.2012 (“CML”), incorporating provisions specifically related to crypto assets.
The innovations introduced in the Capital Markets Law (CML) provisions by the Crypto Assets Law can be summarized as follows:
- The definitions of wallet, crypto asset, crypto asset service provider, crypto asset custody service, and platform have been added to the CML:
| Crypto Asset | Non-physical assets that are electronically generated and stored using distributed ledger technology or similar technologies, distributed over digital networks, and represent value or rights |
| Crypto Asset Service Provider | Entities designated to provide services related to crypto assets, including platforms, organizations providing crypto asset custody services, and other entities designated to provide services related to crypto assets, including initial sale or distribution of crypto assets, based on this Law and regulations to be made |
| Wallet | Software, hardware, systems, or applications that enable the transfer of crypto assets and the online or offline storage of private and public keys associated with these assets |
| Crypto Asset Custody Service | The storage, management, or other custody services of private keys enabling the transfer of crypto assets of platform customers or related to these assets, as determined by the Capital Markets Board (CMB) or other custody services to be specified |
| Platform | Entities where one or more of the following activities are conducted: buying and selling of crypto assets, initial sale or distribution, exchange, transfer, necessary custody, and other transactions as determined |
- The Board (Capital Markets Board) will be able to determine the principles regarding the issuance of capital market instruments as crypto assets and their electronic recordkeeping by crypto asset service providers where they are created and stored. When capital market instruments are issued as crypto assets, records in the electronic environment where these assets are created and stored will be fundamental for tracking rights, asserting them against third parties, and transferring them.
- The establishment and commencement of operations by crypto asset service providers are subject to Board approval, and these providers will only be able to perform activities determined by the Board. The Board will have the authority to establish principles and rules, particularly concerning corporate structure and activities. To be allowed by the Board to establish and/or commence operations, crypto asset service providers must comply with criteria determined by TÜBİTAK (Scientific and Technological Research Council of Turkey) regarding information systems and technological infrastructure.
- It has been mandated that crypto asset service providers must obtain permission from the Board for transfers of shares, and transfers made without such permission will be deemed invalid.
- Contracts between crypto asset service providers and customers may be established using remote communication tools, whether in written form or remotely, as determined by the Board to replace written form, and through methods conducted via a computer or electronic communication device that allow verification of customer identity. The principles regarding these contracts, including their scope, modification, fees and expenses, termination, and dissolution, as well as the minimum requirements for their content, are determined by the Board.
- Any contract term that eliminates or limits the liability of crypto asset service providers towards their customers is deemed invalid. Platforms are required to establish internal mechanisms to effectively resolve objections and complaints regarding their customers’ transactions. Crypto asset service providers are obligated to verify their customers’ identities in accordance with Law No. 5549 on the Prevention of Money Laundering and relevant legislation.
- Prices are freely determined on the platform. Platforms are obligated to identify and report market-distorting actions and transactions to the Board, and take necessary measures including restricting, halting, or closing accounts involved in such actions and transactions. Additionally, compliance with regulations of the Board and the Financial Crimes Investigation Board (MASAK) is required for crypto asset transfer transactions.
- In cases where the Board determines that crypto asset service providers are unable to fulfill their cash payment and crypto asset delivery obligations arising from their activities, or are seriously weakening their financial structure or unable to meet their commitments independently, the Board is authorized to request the strengthening of their financial structures within an appropriate period not exceeding 3 months, or to temporarily suspend the activities of crypto asset service providers without granting a period, revoke their operating licenses, limit or revoke the signing authorities of responsible managers and employees found liable.
- It is prohibited to enforce seizure, lien, inclusion in bankruptcy estate, or imposition of precautionary measures on cash and crypto assets belonging to customers held by crypto asset service providers due to the debts of the providers, or on the assets of crypto asset service providers due to the debts of customers, even if they are for public receivables. Measures, seizures, and any administrative and judicial requests related to cash and crypto assets belonging to customers will exclusively be handled by crypto asset service providers.
- Conducting activities related to crypto assets in Turkey targeting residents by platforms based abroad is considered unauthorized crypto asset service provision.
- The Board envisages measures and administrative fines to be imposed on crypto asset service providers for unlawful activities and transactions.
- Crypto asset service providers are liable for damages arising from their unlawful activities and transactions, and company executives may also be held responsible for these damages in proportion to their faults.
- The liabilities of crypto asset service providers arising from crypto asset losses due to the operation of their information systems, any cyber attacks, information security breaches, or any actions of personnel, are determined in accordance with the principles of liability for danger set forth in the Turkish Code of Obligations No. 6098.
- Individuals and legal representatives determined to operate as crypto asset service providers without obtaining permission are subject to imprisonment and fines.
C. CONCLUSION
As a result, the recently enacted Crypto Assets Law represents a significant step towards creating a secure environment for investors and businesses in our country to operate in this field. The Crypto Assets Law has been developed in accordance with both national and international standards, aligning with global regulations to enhance transparency in the digital asset market and ensure investor protection.
However, the Crypto Assets Law may contain complex and challenging regulations, and regulations related to crypto assets often undergo frequent changes. Therefore, it is crucial to seek guidance from a specialized lawyer to navigate through these processes effectively, including staying updated on the current status of the legislation, managing licensing requirements, providing advice on tax obligations, and preemptively identifying potential legal risks to mitigate potential issues. Our law firm would be pleased to provide professional guidance in these areas, assisting you in effectively managing your legal processes.
The information provided in this note does not constitute legal advice on any matter and is not intended as legal consultation. Please feel free to contact us for our legal opinions on this matter.
