Turkey Nears Finalization of Crypto Asset Regulations: Aims for Safety and Compliance

Turkey is on the verge of finalizing its crypto asset regulations, a move that is anticipated to establish licensing and operational standards for cryptocurrency trading platforms, according to Finance Minister Mehmet Simsek. The regulatory framework is designed not only to mitigate the risks associated with trading crypto assets but also to facilitate the removal of Turkey from the “grey list” of the Financial Action Task Force (FATF), an international financial crime investigator.

Simsek emphasized that the forthcoming regulations would necessitate the licensing of crypto asset trading platforms by the Capital Markets Board (CMB). The new standards will encompass various aspects, including conditions for founders and managers, organizational obligations, and capital requirements. This comprehensive approach aims to enhance the overall safety and integrity of the crypto asset ecosystem within the country.

Turkey has recently ranked fourth globally in terms of raw crypto transaction volumes, with approximately $170 billion recorded over the past year. This surge in crypto activity is attributed to factors such as persistent double-digit inflation, reaching around 65% last month, coupled with an 80% depreciation of the lira against the U.S. dollar over the past five years.

The decision to regulate the crypto space aligns with Turkey’s broader economic strategy and the imperative to address concerns raised by international financial regulatory bodies. In 2021, the FATF placed Turkey on its grey list of countries susceptible to money laundering and other financial crimes. A key concern highlighted in the FATF’s July report was the absence of a requirement for Virtual Asset Service Providers in Turkey to be licensed or registered, limiting regulatory oversight.

Simsek emphasized that the regulatory framework’s primary focus would be on authorizing the Capital Markets Board regarding crypto asset offerings and custody services. Notably, the initial draft of the regulation will not prioritize taxation issues but will concentrate on safety measures and risk elimination in the crypto asset space.

Turkey’s Finance Minister emphasized a proactive and facilitative approach to crypto asset regulation, stating, “Our main goal with crypto asset regulation is to make this field safer and to eliminate possible risks. Our approach is not restrictive. We aim to pioneer for the improvement of blockchain technology and the crypto asset ecosystem.”

The impending regulatory framework is expected to play a pivotal role in shaping Turkey’s crypto landscape, providing clarity, security, and compliance standards for market participants. Simsek’s emphasis on blockchain technology and fostering a conducive environment for the crypto asset ecosystem reflects a balanced approach that aims to encourage innovation while addressing potential risks. As Turkey progresses toward finalizing these regulations, market participants and industry stakeholders will closely observe the impact on the crypto sector and the country’s standing on the international financial stage.