Turkiye’s New Crypto Law: Key Points and Implications

We are pleased to announce that, as of June 24, 2024, significant progress has been made with the Crypto Law in Turkey. Following intense discussions, it has now been passed by Parliament. This development is crucial for the future of cryptocurrency and blockchain technology in Turkiye.

The passing of the Crypto Law in Turkiye marks a significant milestone. It reflects thorough deliberations and a commitment to regulating the crypto space, potentially impacting both local and international crypto markets. This development is crucial for the legal and financial landscape in Turkiye.

Below is a summary of the law.

General Provisions and Definitions

• Article 1: Definitions
• Wallet: Software, hardware, systems, or applications enabling the transfer and online or offline storage of crypto assets or their private and public keys.
• Crypto Asset: Intangible assets that can be electronically created and stored using distributed ledger technology or similar technology, distributed via digital networks, representing value or rights.
• Crypto Asset Service Provider: Platforms, entities providing crypto asset custody services, and other entities designated to offer services related to crypto assets, including initial sale or distribution.
• Crypto Asset Custody Service: Custody, management, or other custody services for customers’ crypto assets or private keys granting transfer rights from wallets, as determined by the Board.
• Platform: Entities conducting crypto asset trading, initial sale or distribution, exchange, transfer, required custody, and other specified operations.
• TÜBİTAK: The Scientific and Technological Research Council of Türkiye.

Principles and Procedures

• Article 2: Principles for Issuing and Monitoring Crypto Assets
• SPK will establish principles for issuing capital market instruments as crypto assets and monitoring these electronically via service providers instead of the Central Registry Agency (MKK).
• Rights related to capital market instruments issued as crypto assets will be monitored electronically, and these records will be valid for asserting and transferring rights against third parties.
• SPK may mandate integration between these electronic records and the MKK system.
• Procedures and principles for these will be determined by SPK.

Licensing and Operations

• Article 3: Licensing and Operational Requirements for Crypto Asset Service Providers
• SPK approval will be mandatory for establishing and operating crypto asset service providers.
• These entities will perform activities specified by SPK.
• SPK will determine rules for the establishment, operations, shareholders, managers, personnel, organization, capital, capital adequacy, obligations, information systems, technological infrastructure, share transfers, permitted activities, and temporary or permanent cessation of activities.
• SPK approval will be required for share transfers of crypto asset service providers.
• Share transfers without SPK approval will be invalid and will not be registered in the shared ledger.
• Article 4: Contracts Between Crypto Asset Service Providers and Customers
• Contracts between crypto asset service providers and customers can be concluded in writing or remotely via communication tools.
• SPK will set rules on these contracts’ drafting, scope, fees, termination, and cancellation.
• SPK may set requirements for the content and conditions of contracts signed with customers.
• Contract terms that eliminate or limit liability towards customers will be invalid.
• Crypto asset service providers must verify customers’ identities per anti-money laundering law and other relevant legislation.

Customer Funds and Asset Management

• Article 5: Separation and Management of Customer Funds in Banks
• Customer funds held in banks will be monitored separately from the funds of crypto asset service providers.
• These funds must be tracked in separate accounts and customer accounts cannot be used as collateral for credit.
• No pledge, lien, or similar encumbrance can be established on these accounts in favor of investment institutions.
• Banks’ responsibility in this regard will be limited to notifications made by investment institutions.

Membership and Association Requirements

• Article 6: Membership in the Turkish Capital Markets Association
• Crypto asset service providers must become members of the Turkish Capital Markets Association.
• This requirement will also apply to crowdfunding platforms.

Internet and Unauthorized Activities

• Article 7: Measures Against Unauthorized Activities on the Internet
• SPK can take measures to prevent unauthorized capital market activities conducted via the internet, including access blocking orders.
• The Information and Communication Technologies Authority will block access to relevant websites upon SPK’s request.

Illegal Activities and Measures

• Article 8: Measures for Addressing Illegal Activities by Crypto Asset Service Providers
• Measures will be defined for addressing illegal activities by crypto asset service providers.
• Measures for unauthorized crypto asset service provision will also be regulated under this article.
• Activities of foreign-based platforms targeting residents of Türkiye or providing prohibited services will be considered unauthorized.
• If foreign-based platforms open offices, create Turkish websites or conduct marketing in Türkiye, their activities will be regarded as targeting residents of Türkiye.

Supervision and Audits

• Article 9: Supervision and Sanctions for Crypto Asset Service Providers
• Supervision and sanctions for crypto asset service providers will be outlined.
• SPK may assign personnel from other public institutions for supervision activities.
• Independent audit firms listed by SPK will conduct financial and information systems audits of crypto asset service providers.
• In case of illegal activities or failure to fulfill financial obligations by crypto asset service providers, SPK may temporarily suspend their activities or revoke their operating licenses.

Market Integrity

• Article 10: Measures Against Market Manipulation and Insider Trading
• SPK will take necessary measures against market-disturbing actions, insider trading, and market manipulation.
• It can decide to block access to publications made via the internet related to these activities.

Penal Provisions

Article 11: Calculation of Administrative Fines

• Administrative fines will be calculated based on certain costs.
• Benefit calculations will not consider paid commissions, taxes, and other costs.
• SPK will determine the prices and cost methods for trading activities to consider in benefit calculations.

Article 12: Penal Provisions for Unauthorized Crypto Asset Service Provision

• Individuals engaged in unauthorized crypto asset service provision will face imprisonment of three to five years and judicial fines ranging from five thousand to ten thousand days.

Article 13: Penal Provisions for Embezzlement by Crypto Asset Service Providers

• Severe penalties are prescribed for crypto asset service providers committing embezzlement.
• Board chairpersons, members, and other personnel committing these crimes will be sentenced to eight to fourteen years in prison and judicial fines of up to five thousand days.
• If the embezzlement involves fraudulent acts to conceal it, the sentence increases to fourteen to twenty years in prison and judicial fines of up to twenty thousand days.
• A sentence reduction will apply if embezzled assets are returned or the damage is fully compensated.

Article 14: Personal Bankruptcy for Embezzlement

• Individuals committing embezzlement may be declared personally bankrupt.
• Personal bankruptcy orders will be issued to cover customer damages from their assets.
• Customer damages will be paid first from the assets, and the remaining part will be returned to the bankrupt individuals.

Article 15: Special Investigation Procedures for Embezzlement

• A special investigation procedure will apply for embezzlement crimes committed by crypto asset service providers.
• Convicted individuals will not be conditionally released until they pay their debts and compensations to the Treasury.
• Embezzlement cases will be tried in the high criminal courts named after the province where the crime occurred.
• Other high criminal courts may be designated for these cases upon the Ministry of Justice’s proposal.

Financial Obligations

• Article 16: Financial Obligations to SPK and TÜBİTAK
• Crypto asset trading platforms are obliged to pay a certain percentage of their annual revenues to SPK and TÜBİTAK.
• Each year, one percent of these revenues will be paid to SPK and one percent to TÜBİTAK.

Transition and Implementation

• Article 17: Transition and Application Periods for Existing Service Providers
• The law’s enactment will determine authorization processes and application periods for crypto asset service providers.
• Existing service providers must apply to SPK within the specified period or terminate their operations.
• Service providers operating at the time of the law’s enactment must apply to SPK for an operating license within one month or decide to liquidate their operations within three months without harming customer rights and interests.
• Foreign-based crypto asset service providers must cease their operations targeting residents of Türkiye within three months.
• Continued operations within this period will be considered unauthorized service provision.

Enactment and Execution

• Article 18: Enactment Date
• The law will come into force on the date of its publication.
• Article 19: Execution by the President
• The President will execute the provisions of this law.

The next step is to present the draft law to the President for approval. If the President does not veto this historic law, it will be officially accepted and come into effect upon publication in the official gazette.

For any questions, please contact us.

GlobalB Law ( Istanbul — California-New York)

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globalb@globalblaw.com

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