Crypto Asset Regulation Has Become Law, What Awaits Investors in the New Era?

With the regulations published in the Official Gazette on July 2, 2024, a comprehensive regulation regarding crypto assets and institutions providing services related to these assets entered into force. These amendments to the Capital Markets Law closely concern both crypto asset users and service provider companies. While the regulation fills many legal gaps regarding crypto assets, it also clarifies the definitions of basic concepts such as wallet, crypto asset, crypto asset service provider and usage service. The Capital Markets Board (CMB) determines the principles regarding the issuance of crypto assets and the monitoring of service providers in the electronic environment. However, it should be noted that new regulations and guides will be published following these regulations and that the current changes are not final. With the amendment to the law, many issues are still unregulated and various issues have been left to the secondary regulations of the CMB, indicating that uncertainties continue in the financial technologies sector.

On July 2, 2024, the Capital Markets Board (CMB) published an application guide for crypto asset service providers to continue their activities legally. Service providers must submit their declarations in accordance with the law, along with the documents determined by the CMB, by August 2, 2024. These documents consist of information on partnerships and partners, explanations on the operations of service providers, and issues regarding platform infrastructures. Regulations have also been introduced for the activities of platforms located abroad in Turkey; situations such as opening a business in Turkey, creating a Turkish website, or conducting marketing activities will be considered unauthorized crypto asset service providers. In order not to fall foul of these new regulations, some foreign crypto exchanges have begun to halt their marketing activities in Turkey. This situation reveals the uncertainties and compliance processes in the sector.

Certain restrictions are imposed on partners of crypto asset service providers or those who will become partners in the future. According to this regulation, partners must not be bankrupt, must not have more than 10% direct or indirect shares in money and capital institutions, and must not have been convicted of crimes such as embezzlement, bribery, bribery, fraud and forgery. The structure of legal entity partnerships is required to be transparent and open. If one of the partners loses their qualifications, they must transfer them to those who meet the qualification requirements within 6 months. The board is authorized to determine how this transfer will take place. Such a clear definition of partnership qualifications ensures that the transactions of the platforms are carried out by reliable persons and in an auditable manner.

The new regulation will render any contractual terms that eliminate or limit the liability of crypto asset service providers to customers invalid. Service providers will be obliged to identify customers within the scope of the Law No. 5549 on the Prevention of Laundering Proceeds of Crime and other relevant legislation. Service providers will also fulfill administrative and judicial demands such as seizure, seizure of cash and crypto assets belonging to customers. In addition, imprisonment and administrative fines to be applied in cases of unauthorized crypto asset service provision and embezzlement by service providers will also be included in the new regulations.

Stating that the crypto asset market will require attention and care in the coming period, Gamze Müge Kan, Partner Lawyer of KYO Legal Law Firm, said: The newly enacted regulations regarding crypto assets bring significant changes for both investors and service providers. It is of great importance for investors to be conscious and careful in this regard. In particular, crypto asset service providers need to comply with legal requirements and investors need to be careful in their platform selection. With the new law, the definitions of wallet and crypto asset service providers are clarified and the CMB’s supervisory authority is increased. In order for service providers to continue their activities, they are required to meet certain criteria and submit the necessary documents. In addition, heavy penalties are introduced for crimes such as unauthorized activities and embezzlement, increasing security and transparency in the sector. However, it should be kept in mind that these regulations are not final and secondary regulations will be published soon. During this transition period, foreign platforms in particular will need to pay attention to their compliance processes. Investors should follow the additional obligations and processes brought by the new regulations more carefully, take their steps more cautiously and act by receiving expert assistance when necessary.”