The Central Bank of the Republic of Turkey ("Central Bank") recently issued a new regulation which prohibits the use of crypto assets as payments for transactions. The Regulation Prohibiting the Use of Crypto Assets for Payments ("Regulation")1 was published on the Official Gazette dated April 16, 2021 and becomes effective as of April 30, 2021.2
Crypto Asset is defined in the Regulation as, all intangible assets that are digitally created with distributed ledger or similar technology and distributed over digital networks; but, are neither characterised as fiduciary (fiat) money, bank money, or electronic currency, nor as a payment, security, or other capital market instrument.
The Regulation prohibits the direct and indirect use of crypto assets in (i) payments transactions, and (ii) the provision of payment services and electronic currency exports. The Regulation draws a broad context for payment transactions by also including those entities that provide payment services and export electronic currency. The Regulation prohibits these entities from providing or developing any service that pertains to such a business model.
The Regulation sets forth that these procedures and principles apply to all entities that carry out exports with electronic currency and provide payment services, as well as those entities that transfer funds to and from platforms or intermediaries of these platforms that buy, sell, deposit, transfer and export crypto assets.
In conclusion, while proscribing the use of crypto-assets in general terms within payment transactions, the Regulation defines the term "crypto-asset" broadly and characterizes the types of entities that may be affected by the Regulation accordingly.
Upon the publication of the Regulation, Central Bank also made an announcement on the matter, and stated that the use of crypto assets in payments might cause irreparable harm on the parties of such transactions and that allowing the use crypto assets might also undermine the confidence in the current payment methods and instruments. The officials of Central Bank further stated that the use of crypto assets in payments might pose various risks on the parties of the transaction, such as the risk that crypto assets might be used in illegal activities due to their anonymous structure, and extreme fluctuations in their market values.
This article was first published in Legal Insights Quarterly by ELIG Gürkaynak Attorneys-at-Law in June 2021. A link to the full Legal Insight Quarterly may be found here
Footnotes
1 The Regulation Prohibiting the Use of Crypto Assets for Payments is enacted per Article 4/3 (I) (f) (4) of Central Bank Law and Articles 12/3 and 18/6 of Law No. 6493 on Payment and Securities Settlement Systems, Payment Services and Electronic Money Institutions.
2 https://www.resmigazete.gov.tr/eskiler/2021/04/20210416-4.htm (Last accessed on May 20 2021)
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