Berat Kaan Güneş / Legal Intern
With the introduction of blockchain technology into our lives, crypto assets and the platforms that facilitate their trading assumed a significant role in the world of economics. Prior to 2 July 2024, the definitions of crypto assets and associated elements had not been established in Turkish law, nor had the principles and procedures governing the operations of organizations engaged in their trade been defined. This situation led to debates over which provisions should be applied to resolve the emerging legal disputes. With the Law No. 7518 on Amendments to the Capital Markets Law (“Law”), definitions for elements such as crypto-assets, wallets, and platforms were introduced in the Capital Markets Law (“CML”), and a general framework was established for the operations of organizations providing services in this field. The amendment granting the Capital Markets Board (“Board”) the authority to make secondary regulations on various matters laid the foundation for crypto asset legislation.
Interest in cryptocurrencies in Türkiye has been growing exponentially since 2019. The necessity for legal regulation became particularly apparent especially following the fraud scandal in April 2021, known as the “Thodex Scam”. As a result of the victimization caused by the transfer of crypto assets, worth 365 million Turkish liras, belonging to thousands of individuals abroad, the then-Minister of Treasury and Finance announced that necessary regulations would be made.
The Financial Action Task Force (FATF) affiliated with the Organisation for Economic Co-operation and Development (OECD), which sets standards to prevent money laundering and terrorist financing, has prepared a “Grey List” that includes countries that are risky and need to be monitored. To be removed from this list, it is necessary to comply with the 40 recommendations published by the FATF. Of these, 15th recommendation which addresses “risks arising from new technologies”, has been an important factor for this change.
With the addition of provision 35/B to the CML, it has become mandatory for crypto asset service providers (“Service Providers”) to obtain permission from the Board in order to establish and commence operations. Similarly, share transfers will be valid without the Board's approval.
The Law imposes an obligation on Service Providers to ensure the security of their systems against cyber-attacks. In accordance with this obligation, compliance with the criteria set by The Scientific and Technological Research Council of Türkiye (TÜBİTAK) is required.
The shareholders and members of the Board of Directors of Service Providers are required to meet various qualifications. Accordingly, the partners of the Service Provider must:
The members of the board of directors must meet all the requirements for the shareholders, except for the financial strength requirement.
In accordance with the Board's principal decision dated 8 August2024 and numbered 42/1259, in addition to the provisions of the law, Service Providers must:
Contracts between Service Providers and their customers must be executed in writing or remotely through the use of communication tools. During the use of these systems, mechanisms enabling customer identity verification should be employed. Prior to the Law, some Service Providers did not employ identity verification systems, which allowed the transfer of proceeds from illegal transactions through these providers. The Law aims to address and prevent this issue.
It added provision stipulates that any contractual terms that eliminate or limit the liability of Service Providers will be deemed invalid.
Service Providers are also required to establish internal mechanisms, such as live support and customer service hotlines, to resolve complaints and objections.
Pursuant to added Article 99/A of the Law, Service Providers that do not comply with the legislation or the standards established by the Board may be granted a period to meet these standards. If Service Providers do not comply with the established standards within the given period, the Board is authorized to suspend their activities and to restrict or revoke the signature authority of their employees and managers. In addition to these standards, if it is determined that the financial strength of Service Providers is weakening, the Board may grant them a period of up to 3 months to strengthen their financial situation. The Board is also authorized to apply the aforementioned measures to Service Providers that fail to improve their financial situation.
Under Article 99/B added to the CML, Service Providers are subject to audits. These audits are conducted by independent auditing firms listed by the Board. Service Providers are responsible for damages arising from illegal activities. If it is determined that the damages cannot be compensated by the Service Providers, company members will be held personally responsible for the damages to the extent of their personal asset, based on their faults and circumstances of the situation.
In addition to all these provisions, it is stipulated that Service Providers will be subject to administrative fines for non-compliance with the requirements set forth in Articles 35/B and 35/C of the CML.
Another significant change pertains to the attachment of crypto assets under the Enforcement and Bankruptcy Law. Measure, attachment, and similar requests concerning customers of Service Providers will be processed by the Service Providers through integration systems they will establish. Attachment of crypto assets will be carried out electronically upon request by creditors through the National Judicial Network Informatics System (UYAP).
Article 11 of the Law establishes the steps that Service Providers must take. Accordingly:
Since the Law came into effect on 2 July 2024, Service Providers were given time until 2 August 2024, to make their declaration. Service Providers who submitted their declarations within this period have been published on the Board's website.
Simultaneously, Service Providers that will not continue their operations must declare to the Board by 2 October 2024 their decision to liquidate and their intention not to accept new customers.
The Law has defined crypto-assets and elements such as wallets, thereby concluding discussions about the nature of these assets within Turkish law. It has introduced regulations concerning the establishment and commencement of operations for Service Providers, as well as the qualifications required for individuals involved. Also, various penalties have been stipulated for real or legal persons that do not comply with these regulations.
Pursuant to Provisional Article 11/7 of the CML, it is known that the Board will publish secondary regulations by February 2025. Monitoring these secondary regulations will be very crucial for resolving legal disputes related to crypto assets.
The information and assessments provided in this article are for informational purposes only and do not constitute a legal opinion on any specific case.
This article does not serve as an advertisement. The intellectual property rights of this article are owned by Emine Ceren Çakır Attorney Partnership, and all rights are reserved.