A committee in the Turkish parliament will discuss a draft law this week that would impose licensing and registration obligations on crypto asset service providers.
The bill aims to improve the country’s standing with the Financial Action Task Force (FATF), a global financial watchdog.
In October 2021 FATF downgraded Turkey to its “grey list” for insufficient supervision of its banking, real estate and other sectors susceptible to money laundering and financing groups on the United Nations’ sanctions list, such as the Islamic State and al-Qaeda. Countries on this list undergo increased monitoring and must collaborate with FATF to rectify deficiencies.
The Turkish parliament’s Planning and Budget Committee will review the proposed legislation, which includes 19 articles aimed at defining the legal status of crypto assets.
The draft law outlines requirements and responsibilities for platform management, the range of services platforms can provid and financial and operational standards. Ankara has been developing this legislation for over two years to regulate the sector and mitigate risks, particularly after the bankruptcy of several smaller trading platforms left thousands without access to their funds.
The bill stipulates that cryptocurrency trading platforms and other companies in the sector obtain licenses from Turkey’s Capital Markets Board (SPK).
“The law regulates crypto asset service providers, the activities of crypto asset platforms, storage of crypto assets and crypto asset buying, selling and transfer transactions that people residing in Turkey can make,” according to the draft law.
Key provisions in the proposed legislation require that crypto asset service providers also secure their information systems, with specific technological criteria set by authorities.
The issuance, sale and distribution of crypto assets will be regulated by the SPK, aiming to standardize the process and protect investors from fraud and market manipulation.
Investor protections and market integrity are emphasized in the legislation. Contracts that limit or remove the liability of crypto asset service providers towards their customers will be invalid. Mechanisms will be established to handle investor complaints and disputes, and measures will be taken to prevent market-disruptive activities. The SPK will also regulate the principles and procedures for providing crypto investment advisory services.
Unauthorized crypto asset services will be criminalized, punishable by three to five years of imprisonment. Existing crypto asset service providers will have a period of transition to comply with the new regulations, either by applying to the SPK within one month or deciding to liquidate within three months.
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