Türkiye on Wednesday announced it had reached the final phase in the technical studies of the legal regulations regarding crypto assets, seeking to mitigate risks and regulate trading platforms and transactions.
The regulations are expected to bring licensing and operating standards to trading platforms as well as help the country to be taken off an international financial crime watchdog "grey list," Treasury and Finance Minister Mehmet Şimşek said.
"Our primary goal with cryptocurrency asset regulation is to make this area safer and eliminate potential risks. Our approach is not restrictive; it is based on eliminating uncertainties and controlling possible risks," Şimşek was cited as saying by Anadolu Agency (AA).
The regulations are aimed at paving the way for the development of blockchain technology and the cryptocurrency asset ecosystem, he noted.
Highlighting significant interest in cryptocurrency trading platforms, especially during and after the COVID-19 pandemic, the minister stressed various risks, including misuse on some platforms and excessive price movements.
"Therefore, we are taking steps to reduce the risks for those engaging in transactions with crypto assets in our country, similar to international practices," Şimşek said.
This also constitutes one of the steps Şimşek said Türkiye needs to take to be removed from the "grey" monitoring list of the Financial Action Task Force (FATF).
The FATF downgraded Türkiye to the "grey list" in 2021. In November last year, Şimşek cited the latest FATF report that he said found Türkiye fully compliant with all but one of the watchdog's 40 standards.
"The only remaining issue within the scope of technical compliance is the work related to crypto assets," he said.
The grey list includes countries the FATF suggests have taken insufficient action to prevent money laundering and terrorist financing.
Türkiye has harshly criticized the watchdog, citing its compliance efforts show a resolute high-level political commitment against money laundering and the financing of terrorism.
In a July report, the FATF said that the lack of requirement for Virtual Asset Service Providers to be licensed or registered in Türkiye could limit authorities' ability to regulate them. It was the last of 40 recommendations marked as "partially compliant" in the report that Türkiye needed to address.
Şimşek referred to the regulations already made by the country's central bank and the Financial Crimes Investigation Board (MASAK), which he said enabled them to be informed about transactions and transfers taking place on platforms.
"But of course, we need to do more than that," he said.
Şimşek explained that there is no single regulation worldwide and the United States and European countries have different approaches, adding that Türkiye is closely and cautiously monitoring developments.
"At this stage, when we look at foreign practices regarding crypto assets, we see that countries are progressing by adopting approaches suitable for their own financial and legal systems. In this sense, it becomes clear that steps need to be taken in our country regarding such regulation."
Şimşek emphasized that the fundamental aim of the legal work is to regulate platforms and transactions taking place within them.
"Licenses for cryptocurrency trading platforms will be issued by the Capital Markets Board (SPK), and minimum operational requirements similar to financial institutions will be imposed," he said.
"These will include conditions related to founders and managers, organizational obligations, capital requirements and information technology infrastructure obligations."
Türkiye ranked fourth globally in raw crypto transaction volumes, at approximately $170 billion over the last year, behind the U.S., India and the United Kingdom, according to a report by blockchain analytics firm Chainalysis.
Detailing that the specifics of operational requirements will be determined through secondary regulation, Şimşek stated, "The definitions of cryptocurrency, wallet, cryptocurrency service provider, cryptocurrency storage service and cryptocurrency trading platform have been included in our draft, in line with international regulations.
"Crypto assets have been broadly defined in our draft."
According to Şimşek's announcement, crypto assets are defined as "intangible assets created and stored electronically using distributed ledger technology or similar technology, distributed through digital networks, and capable of representing value or rights."
Şimşek clarified that taxation would not be the focal point at this stage of the regulation and that the matter would be studied separately.
He also said the draft will include regulations authorizing the SPK on crypto asset offerings and custody services.
