Turkey Tightens Crypto Regulations with New Oversight Rules

Turkey has taken a significant step towards tightening its regulatory framework for cryptocurrency exchanges and custodians. The Capital Markets Board (CMB) has announced new rules that will subject Crypto Asset Service Providers (CASPs) to stricter oversight, including licensing, operational compliance, and adherence to national and international standards. These regulations, which came into effect on March 13th, mark a pivotal moment in Turkey's approach to regulating the crypto-assets ecosystem.

The new regulatory framework grants the CMB complete oversight of domestic crypto platforms. This includes the licensing of CASPs, ensuring their operational compliance, and enforcing adherence to regulatory standards. The CMB's involvement signifies a shift towards formal regulation of the crypto sector, with the framework setting standards for establishing and providing crypto asset services. These standards cover establishment capital, the history of executives, shareholder rules, and other critical aspects.

The regulations also impose tangible financial obligations on CASPs. Exchanges are required to have a minimum capital of $4.1 million, while custodians must have at least $13.7 million. These capital requirements are designed to ensure the financial health of CASPs operating in the country. Additionally, CASPs must invest in compliance infrastructure and build risk management teams to detect and address various risks. Traders will also be required to implement a price monitoring system to identify and report suspicious trading activities, aiming to prevent market manipulation and protect investors.

Turkey is also enhancing its Anti-Money Laundering (AML) frameworks as part of these new regulations. CASPs will be required to keep records of a broad range of transaction data, including information on canceled and unexecuted transactions. This substantial increase in data management and reporting is aimed at improving the traceability and security of crypto transactions. In 2022, Turkish regulators proposed AML regulations requiring users to share identifying information for any transaction over 15,000 Turkish Liras, approximately $409. This new requirement adds an extra layer of complexity to transactions but enhances security and traceability.

The CMB’s regulatory framework explicitly prohibits derivative transactions involving cryptocurrencies. This ban will significantly impact trading strategies and investment options for Turkish crypto users. However, exchanges can issue Initial Coin Offerings (ICOs) as long as smart contracts are well-audited and listing criteria are high. The issuance of security tokens is not explicitly prohibited, and the regulations do not define what constitutes a security token. Purchases of goods and services with crypto remain banned in Turkey based on a Central Bank regulation.

Turkey’s new crypto regulations are being shaped to align with global standards, according to official documentation. The government is monitoring regulatory pathways laid out by Europe’s Markets in Crypto-Assets Regulation (MiCA) and the U.S. Securities and Exchange Commission (SEC). This alignment signals that Turkey aims to be a responsible player in the global crypto ecosystem, adhering to best practices to establish a secure and compliant environment.

As part of broader updates to crypto regulations, Turkey is increasing accountability through the Travel Rule. This rule, which is part of the Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) framework, will see expanded information-sharing requirements during crypto transfers. This security enhancement initiative is spearheaded by MASAK (the Financial Crimes Investigation Board) under the Ministry of Treasury and Finance, with the rules taking effect starting February 25, 2025.

These regulations present both challenges and opportunities for crypto businesses in Turkey. While they may act as a stumbling block, they also bring the potential to attract legitimate crypto businesses and foster innovation in a controlled ecosystem. The long-term effects will depend on how well these regulations are enforced and how the crypto community responds. These regulations serve as a warning to market participants, emphasizing the need for compliance and transparency in the crypto sector.