Following lengthy negotiations, Türkiye has set out the rules for crypto assets ("CAs") and crypto asset providers ("CASPs").
With the amending law ("Amending Law") which introduces new provisions to the Capital Markets Law ("CML") and entered into force on 2 July 2024, Türkiye has given the Capital Market Board ("Board") authority to regulate CAs and CASPs.
This enables the Board to regulate the procedures and principles regarding CASPs and CAs.
It should be noted that the Amending Law provides a general framework for the time being, with further details to be outlined by the Board in the secondary regulation, which is expected to be published in the upcoming six months.
What are the key concepts?
The Amending Law defines "platform" as organisation that engage in one or more of the following activities: buying and selling of crypto assets, initial offering or distribution, exchange, transfer, required custodial services, and other transactions that may be determined by the Board in the future
Accordingly, CASPs are defined as "platforms, organisations providing crypto asset custody services, and other organisations designated to provide services related to crypto assets, including the initial offer or distribution of crypto assets, in regulations to be issued based on the Law, namely CML."
In light of the above definitions, it is crucial for those engaged in business within the crypto ecosystem to conduct a legal assessment to ascertain whether their services fall under the relevant definitions. This will determine whether their services are subject to the CML.
What is the main rule for operating as a CASP?
Pursuant to the Amending Law, CASPs are required to obtain authorization ("License") from the Board in order to be incorporated and to provide services to its customers under the CML.
Failure in operating without obtaining License shall cause the breach of Law which may result in imprisonment and judicial fines.
It should be noted that in order to be able to obtain a License from the Board, the applicant has to be a company incorporated in Turkey.
What are the key deadlines for transition period?
Any CASPs currently operating in Türkiye (and with a legal establishment in Türkiye) at the time the Amending Law entered into force (on 2 July 2024) must apply to the Board within one month (by 2 August 2024) and submit a declaration stating that
- they will either make the necessary applications to obtain an operating licence by fulfilling the conditions to be stipulated in the secondary regulations, or
- they will decide to liquidate within three months without detriment to customer rights and without accepting any new customers during this period.
Please be advised that the Board has taken prompt action and has already published the declaration documentation that is required to be submitted. The same can be accessedhere.
Given the importance of the relevant documentation and the fact that incomplete or incorrect applications will not be accepted, it is of the utmost importance that the relevant documentation is filled out with the utmost care and with the help of a professional consultant.
Besides, the Amending Law stipulates that any entity wishing to commence operations after 2 July 2024 must submit an application to the Board prior to commencing activities and confirm that they will apply for an operating licence in accordance with the conditions set out in the secondary regulations.
What is the main rule for CASPs based abroad?
As a main rule, the activities directed at individuals residing in Türkiye by platforms based abroad or the offering of a prohibited activity related to crypto assets to individuals residing in Türkiye within the scope of regulations to be made by the Board shall be consideredunauthorized crypto asset service provision.
Thefeore, CASPs based abroadmust terminate their activitiesdirected at individuals residing in Türkiyeby 2 October 2024.
If any of the following conditions are met by platforms based abroad, it will be deemed that their activities are "directed" at individuals residing in Türkiye:
- Establishing a workplace in Türkiye, creating a Turkish-language website, or
- Engaging in promotion and marketing activities related to the provided crypto asset services directly and/or through individuals or institutions residing in Türkiye.
Additional criteria for determining whether the activities are directed at individuals residing in Türkiye may be established by the Board.
In light of the aforementioned rule, it is our opinion that CASPs based abroad and who do not target Turkish users in the aforementioned sense would still be able to provide services to Turkish users, provided that the service is initiated on the user's own exclusive initiative (known as the 'reverse-solicitation rule').
What is the next step for CASPs based abroad?
As previously stated, CASPs based abroad must cease all activities directed at individuals residing in Türkiye by 2 October 2024 by taking the above "being directed at individuals" criteria into the account.
Furthermore, it should be reminded that any entity wishing to commence operations after 2 July 2024, including CASPs based abroad, must submit an application to the Board prior to starting activities. They must also confirm their intent to apply for a License in accordance with the conditions to be set out in the secondary regulations.
It is crucial to note that such applications can only be submitted by a company incorporated in Turkey. Therefore, CASPs based abroad must own a legal entity in Turkey to make the above mentioned application.
Originally published by Medium.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.