As an analyst with a background in financial regulation and experience living in Turkey, I’m closely monitoring the developments regarding crypto regulations in this country. Based on the available information, it appears that Turkey is still in the process of drafting legislation to regulate the crypto market, despite having some “light” regulations already in place.
This year, Turkey’s government, which boasts a significant cryptocurrency sector, is anticipated to pass laws concerning digital currencies.
The Turkish Finance Minister, Mehmet Simsek, declared in January that the legislative framework for cryptocurrencies in Turkey was nearing completion. It had been anticipated that parliament would initiate crypto regulations in early 2024; however, as of now, the proposed legislation has yet to be presented.
As a crypto investor, I’ve been pondering over Turkey’s regulatory stance on digital currencies and when we can expect clear-cut legislation. To shed some light on this matter, I reached out to local industry insiders for some enlightening insights.
Turkey already has some “light” crypto regulations
As a market analyst, I’d like to clarify that even though Turkey hasn’t passed specific crypto regulations yet, it doesn’t imply a lack of existing guidelines for the cryptocurrency market within the country.
As a cryptocurrency analyst, I’ve come across Ismail Hakki Polat’s perspective that presently, the regulations governing crypto use in Turkey are relatively minimal. It is essential to note, however, that these regulations have not been officially established by the Turkish parliament.
Turkey enacted two significant regulations concerning cryptocurrencies in 2021. The first regulation stems from the Central Bank of the Republic of Turkey, disallowing individuals from using crypto assets, such as Bitcoin (BTC), for making payments due to their status as non-legal tender.
“The rule in question hasn’t been legislated by parliament yet, so it’s unclear what the repercussions, penalties, or fines would be for disobeying it. In other words, this regulation lacks practical effect.”
The second rule pertains to Anti-Money Laundering (AML) procedures and is overseen by the Financial Intelligence Unit of the Ministry of Finance, commonly referred to as MASAK.
Under this rule, exchanges must gather specific identity verification information from their users to forestall unlawful activities such as money laundering and terrorist funding.
The CEO of Mindstone Blockchain Labs, Tansel Kaya, mentioned that the Capital Markets Board of Turkey (CMB) has issued crypto-related directives, which are referred to as SPK (Sermaye Piyasası Kurulu Guidance).
The SPK declared that it is forbidden for anyone or any entity connected to the regulatory body to engage in trading cryptocurrencies. This prohibition applies to Turkish banks, brokerage firms, and other relevant entities. Kaya stressed that this regulation, which was implemented by the CMB in 2017, is quite outdated.
Turkey is the fourth-largest crypto trading market in the world
Turkey ranks among the leading nations in terms of cryptocurrency economics on a global scale, boasting a significant adoption rate for digital currencies.
As a researcher examining cryptocurrency market data from Chainalysis, I’ve discovered that Turkey holds the fourth-largest estimated trading volume globally, amounting to approximately $170 billion. This figure surpasses the volumes of countries such as Russia, Canada, Vietnam, Thailand, and Germany.
In September 2023, the Turkish lira emerged as the most traded fiat currency pair against cryptocurrencies on Binance. Approximately 75% of Binance’s total trading volume involved the lira during this period. This surge was primarily driven by a large number of new crypto investors entering the Turkish market.
According to recent research, the number of Turks adopting cryptocurrencies has nearly doubled in the past few years, with approximately 40% of the population now using them. One study indicates that out of every five Turkish citizens, two have embraced cryptocurrencies.
Approximately 24% of Turkey’s population, estimated to be around 20 million people, are believed to invest in cryptocurrencies, according to Polat.
Why does Turkey want to adopt crypto regulations in 2024?
Turkey is expected to utilize its upcoming crypto regulations to help the country get removed from the FATF’s “gray list,” which was imposed due to concerns regarding excessive regulation of the non-profit sector in the context of Anti-Money Laundering (AML) measures, where Turkey was added in October 2021.
Based on Polat’s information, Turkey needs to address 39 specific tasks in order to graduate from the FATF’s “gray list.” One of these tasks involves regulations concerning the crypto industry. The Financial Action Task Force (FATF) mandates that countries adhere to its guidelines to prevent virtual assets from being utilized for illicit activities.
Turkey’s crypto law will address crypto exchanges, taxes and more
As a financial analyst, I would explain that I am closely monitoring the development of crypto regulatory legislation in Turkey. The primary focus of this legislation is expected to be on regulating and granting licenses to cryptocurrency exchanges within the country.
Under the new regulation, virtual asset service providers (VASPs), also known as exchanges, will have their duties and liabilities clearly outlined. The legislation places significant emphasis on safety standards for the custody of cryptocurrencies by these entities, ensuring optimal investor security.
In Turkey, the investor protection issue gained significant attention following the unexpected closure of a local crypto exchange named Thodex in April 2021. During this time, trading and withdrawals were suddenly halted. The founder of Thodex, Faruk Fatih Özer, was later convicted of fraud charges amounting to an estimated $2 billion in 2023 and received a sentence totaling 11,196 years.
The new crypto legislation in Turkey, due to be implemented, aims to establish a solid legal framework for imposing taxes on cryptocurrencies alongside the existing VASP regulations.
As a researcher, I’ve come across information indicating that Turkey’s Revenue Administration intends to levy transaction taxes on cryptocurrencies at low rates. One such tax is the Banking and Insurance Transactions Tax (BSMV), currently set at a rate of 5%.
The government is likely to make it mandatory for citizens to disclose their cryptocurrency earnings, yet reports indicate that they intend to levy a withholding tax at a zero rate.
Additionally, the upcoming bill is expected to address regulation of tokenizing real-world assets.
When Turkey is expected to introduce crypto legislation?
I, as an analyst, cannot definitively state when Turkey will unveil its cryptocurrency regulations, contrary to earlier expectations of seeing advancements in the first quarter of this year.
Industry experts have noted the coincidence of Turkey’s announcement of crypto regulations and the approaching US OFAC meeting in June.
As a researcher, I can share that the removal of Turkey from the gray list is predicted to occur once the necessary legislation is passed and the implementing regulations are in force. According to my findings, this anticipated regulation is slated for release in May.
As a researcher, I believe the event in question may occur towards the close of this parliamentary session, around June.
“But if they are not able to, then it means that it will be shifted to autumn or maybe the end of the year. So in my view the gray list issue is now a bit dropped from the agenda.”
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2024-05-06 15:28