Turkey nears completion of comprehensive crypto regulation framework

The Turkish government is set to establish legal definitions for key cryptocurrency concepts, regulate trading platforms through licensing, and align with the standards of the Financial Action Task Force (FATF).

In an interview with the Anadolu Agency on Jan. 10, Turkish Minister of Treasury and Finance Mehmet Şimşek confirmed that the cryptocurrency framework tailored for the Turkish market is nearing completion, with current efforts focused on uating the technical aspects of its implementation.

Şimşek emphasized that the upcoming regulations aim to mitigate the risks associated with cryptocurrency trading, protecting ordinary investors. Key aspects of these regulations include legal definitions of crucial crypto-related terms such as “crypto assets,” “crypto wallets,” and “crypto asset service providers.”

Additionally, the guidelines will mandate that crypto platforms acquire licenses from Turkey’s Capital Markets Board (CMB).

Şimşek clarified that while the regulations provide a clear framework for crypto trading, they will not establish a specific tax regime for virtual assets. He also provided an example of how crypto assets will be defined: as intangible assets that are electronically created and stored using distributed ledger technology or similar, distributed over digital networks, and capable of representing value or rights.

This move towards regulation follows Turkey’s consideration of crypto regulation since May 2022. The AK Party, led by President Recep Tayyip Erdogan, previously proposed a minimum capital requirement of 100 million liras (equivalent to $3.4 million) for crypto businesses, although this proposal has not yet been publicly discussed.

In early November 2023, Şimşek announced the introduction of crypto legislation, highlighting Turkey’s compliance with 39 of the 40 FATF standards. The country aims to exit FATF’s “grey list,” which it has been on since 2021. This status has impacted confidence in Turkey’s economy, already strained by high inflation rates.

Amidst these economic challenges, cryptocurrencies have become increasingly popular in Turkey, offering an alternative financial option for many. Chainalysis, a blockchain analytics firm, reported that Turkey ranked fourth globally in crypto transaction volumes between July 2022 and June 2023, with about $170 billion in activity, trailing only the United States, India, and the United Kingdom.