On 2 July 2024, with the Law on Amending the Capital Markets Law numbered 7518, published in the Official Gazette numbered 32590, amendments were made to various articles of the Capital Markets Law numbered 6362 (“CML”) regarding cryptocurrency assets. Primarily, cryptocurrency asset service providers (“CASPs”) operating or set to operate in Türkiye were brought under the scope of the CML and subjected to the regulatory and supervisory authority of the Capital Markets Board (“CMB”). Following this, the CMB published an announcement on its website dated 2 July 2024 (“Announcement”), explaining the procedures to be followed by CASPs.
Since the deadline, for CASPs to submit their applications to the CMB within the framework of the Announcement has ended on 2 August 2024, the CMB issued the principal decision i-SPK.35.B (dated 8 August 2024 and numbered 42/1259) published in its bulletin dated 8 August 2024, to shed light on the subsequent process.
The CMB continues to shape the implementation and regulations regarding crypto assets. In this context, a new principal decision ("Principal Decision") has been published in CMB bulletin No. 2024/48, dated 19 September 2024, with the reference number i-SPK.35.B.1 (dated 19 September 2024 and numbered 1484). In the Principal Decision, it was determined that, within the scope of the Announcement issued pursuant to the Temporary Article 11 added to the CML, there were differing practices regarding the safekeeping of customer funds, customer orders were being taken via social media, and there was a need for regulation concerning the listing of cryptocurrency assets. Additionally, the Principal Decision highlighted the need for regulations in areas such as advertising, announcements, and investor protection for crypto asset platforms ("Platform"), and thus certain principles and guidelines were established to ensure a smooth transition and operational process.
Custody and Management of Customer Funds
The Amendment Law emphasized that customer funds (i.e., cash) should be held in banks, that the assets of CASPs should be kept separate from customer funds and cryptocurrencies, and that records should be maintained in accordance with this provision. Additionally, it was stated that customer funds should be tracked in a separate account from the cash accounts of Platform.
The Principal Decision states that accounts opened on behalf of customers should be explicitly defined as belonging to the customers and cannot be used for other purposes. It also stipulates that customer fund transfers should only be conducted through banks or institutions authorized in accordance with the relevant regulations. Platforms cannot receive or hold customer fund in physical form.
Procedure for Accepting Customer Orders and Maintaining Records
It is explicitly regulated that Platforms cannot accept customer orders through social media channels such as Telegram and WhatsApp. In this context, customer orders can only be accepted through the Platforms' own websites, mobile applications, or the official phones of the Platforms' authorized personnel, which are notified to the CMB.
The Principal Decision also emphasizes the need to maintain accurate and reliable records, and thus establishes the relevant principles around this. Electronic log records of customer orders received through the website or mobile application (including date, time, and identifiable source placing the order) and voice recordings and logs of customer orders received by phone should be stored in an immutable and unalterable manner, with time-stamped. It is necessary to establish the required infrastructure to ensure this, and the aforementioned data and records should be maintained in accordance with the principles noted here as of 8 November 2024.
Customer Orders Received through Unauthorized Channels
Those who conduct cryptocurrency transactions (such as buy-sell, initial sale or distribution, exchange, transfer, custody operations, and conversions between cryptocurrency and cash) using different channels or methods outside the channels specified by the CMB, operating similarly to currency exchange offices or similar structures, will be considered as engaging in an unauthorized CASP activities under the CML and will be subject to relevant penalties.
If customer orders are received through a channel other than the Platform’s own web-site, mobile applications, or the official phones of the Platforms’ authorized personnel, and if it is determined that this is done regularly or as part of commercial or professional activities, measures will be applied for conducting unauthorized capital market activities related to these organizations, as well as for any illegal activities or transactions designated for capital market institutions.
NFTs and Cryptocurrencies Used Exclusively in Virtual Games
The Principal Decision emphasizes that Non-Fungible Tokens (“NFTs”) and cryptocurrencies used solely for various purposes in virtual games (i.e., utility tokens) are excluded from the listing principles set forth in the CML, and the provisions of the CML concerning cryptocurrencies will not apply to transactions involving these assets.
As stated in the Announcement, certain obligations on the said crypto assets have been imposed on the Platforms listed in the "List of Operating Entities" published on the CMB's website. Accordingly, the listed Platforms that engage in transactions involving the mentioned crypto assets after the date of the Principal Decision are subject to the following obligations:
Notification should be made to the CMB.
These assets should be traded in a market different from those listed as per the CML.
In case of a trade a separate market, a notification should be made to the customer with the following statement: "The assets traded in this market are outside the listing principles of the Capital Markets Law numbered. 6362 and are not subject to the supervision and regulation of the Capital Markets Board." Furthermore, it should be confirmed by the customers that such notification message has been read and understood by them. The customer order should only be taken after this confirmation.
LP (Liquidity Provider) Activities
The activities of institutions that provide prices to the Platforms for the purpose of supplying liquidity and conduct transactions based on these prices (i.e., LPs) where these institutions do not offer any additional services to investors, are not currently considered as Platform activities under the CML, since they do not fall within the definition of a Platform at this stage.
Transactions on Peer-to-Peer (P2P) Platforms
The commercial or professional activities of cryptocurrency trading, buying, selling, and exchanging activities directly between users on peer-to-peer (P2P) digital marketplaces will be considered unauthorized CASP activity under the CML. These activities should be terminated by 8 November 2024.
The Relationship Between Real-World Assets and Cryptocurrency Assets
Under the CML, the responsibilities and authorities of institutions and organizations regarding crypto assets arising from other legislation have been preserved, and the Amendment Law has not introduced any changes to such regulations through changing the CML. In this context, it has been stated that all responsibilities and liabilities arising from the relevant other legislation continue to remain valid, and that the use of cryptocurrencies as an instrument does not create any differences in the application of any legislation. In this regard, activities falling within the authority and regulatory scope of other institutions and organizations (such as commodities, real estate, etc.) should be conducted in accordance with the regulations of these institutions and organizations, whether the asset is a cryptocurrency or not. Crypto assets that do not comply with this will not be listed on the Platforms.
Due to the incomplete functioning of the custody infrastructure for crypto assets and the reserve proof mechanisms, it has been determined that the issuance and listing of capital market instruments as crypto assets are not possible under the CML yet. Therefore, until the CMB establishes regulations, capital market instruments and indices valued in relation to them, as well as baskets that combine various asset groups (including crypto assets), precious metals, and underlying assets for warrants, cannot be issued as crypto assets or listed on Platforms. It has been stated that new sales and distributions of currently listed crypto assets falling under this scope will not be allowed, although conversions to cash or transfers of previously sold assets will be permitted.
Advertising and Promotion Activities Conducted by Platforms
With the Principal Decision, the CMB has established the guidelines regarding the advertisement and promotional activities conducted by Platforms. Platforms should ensure that their publications, announcements, advertisements, and communications across all written, visual, and electronic channels (such as press, internet, radio, television, cinema, outdoor advertising, and printed materials) are objective and should not present misleading or false information that misuse customers' lack of experience. Additionally, they are prohibited from making absolute return guarantees or commitments against losses, except in cases permitted by regulations.
Promotion campaigns conducted by the Platforms that offer customers a promise of a specific return, encourage investment in one or more cryptocurrencies, or provide any benefits or advantages to individuals who bring customers to the platform or to the referred customers are prohibited. These types of campaigns should be ceased within 15 (fifteen) days from the date of the Principal Decision, in a manner that does not lead to investor harm.
Data Transfers to CSD
The Principal Decision states that Platforms should meet the technical infrastructure requirements set by Central Securities Depository (“CSD”) (Merkezi Kayıt Kuruluşu A.Ş. – MKK) when transferring data to CSD and should complete system integration in accordance with the format and timeline prescribed by CSD. However, CSD has not yet issued any regulations or announcements regarding this matter.
Responsibility of Platforms in Customer Transactions and Leveraged Transactions
Platforms can only sell cryptocurrency assets up to the amount held in their own wallets in transactions where they function as the counterparty to customers. In transactions between customers, it is the responsibility of the Platforms to ensure that the cryptocurrency assets are present in the relevant accounts and that transfer transactions are executed.
Platforms are prohibited from conducting any transactions on behalf of themselves or third parties regarding customers' cryptocurrency assets and cash. It has been regulated that Platforms do not have the authority to engage in lending cryptocurrency transactions, providing loans to customers, or conducting leveraged transactions. In this context, it has been emphasized that open positions should be closed without causing customer detriment and through an appropriate transition process.
Custody of Customers' Cryptocurrency Assets
It is the main principle for Platforms to ensure that customers' crypto assets are held in the customers' own wallets as per the CML. In cases where customers do not keep their cryptocurrency assets in their own wallets, the key control of the wallets where the assets in customer accounts on the Platforms are held should be with the Platforms by no later than 8 November 2024. Those who fail to comply with this rule will be subject to penalties under the relevant provisions of the CML.
Conclusion
The Principal Decision serves to clarify key market questions in the ongoing process of cryptocurrency regulation in Türkiye. The primary approach adopted by the CMB through its principal decisions and announcements is to ensure investor protection while also targeting the efficient, transparent, and orderly functioning of the market. Future regulations will further clarify Türkiye's legal framework concerning cryptocurrency assets and shape the market.
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