Regulation on crypto assets accepted in the Grand National Assembly of Turkey

Following the conclusion of deliberations, the Bill on Amendments to the Capital Markets Law, which includes regulations regarding crypto assets, has been accepted by the TBMM Planning and Budget Committee.

The bill adds definitions regarding crypto assets to the Capital Markets Law.

Accordingly, a "wallet" is defined as software, hardware, systems, or applications that enable the transfer of crypto assets and the storage of these assets or the private and public keys related to these assets, either online or offline.

According to the bill, a "crypto asset" is defined as intangible assets that can be created and stored electronically using distributed ledger technology or a similar technology, distributed through digital networks, and capable of expressing value or rights.

While "crypto asset service provider" includes platforms, institutions providing crypto asset custody services, and other institutions determined to provide services related to crypto assets, including the initial sale or distribution of crypto assets in regulations to be made based on this Law, "crypto asset custody service" will define the storage, management, or other custody services to be determined by the Board for the crypto assets of platform customers or the private keys that provide the right to transfer from the wallet related to these assets.

"Platform" is defined as organizations where one or more of the following operations are performed: crypto asset trading, initial sale or distribution, exchange, transfer, and the custody required by these, as well as other operations that may be determined.

AUTHORITY TO BE GRANTED TO THE SPK

The aim is to authorize the Capital Markets Board to determine the principles for the issuance of capital market instruments as crypto assets without being included in the Central Securities Depository (MKK) system.

Accordingly, the Board will be able to determine the principles regarding the issuance of capital market instruments as crypto assets instead of being issued in book-entry form and monitored by the MKK in accordance with the provisions of this article, and their monitoring in book-entry form within the electronic environment provided by the service providers where they are created and stored.

In the event that capital market instruments are issued as crypto assets; the records in the electronic environment where the crypto assets are created and stored will be taken as the basis for monitoring rights, asserting them against third parties, and transferring them.

The Board may make it mandatory to ensure integration between the records in this electronic environment and the MKK system.

CRYPTO ASSET SERVICE PROVIDERS

According to the regulation, it will be mandatory for crypto asset service providers to obtain permission from the Board to be established and to commence operations. They will exclusively perform the activities determined by the Board.

The principles regarding their establishment and commencement of operations, their partners, managers, personnel, organization, capital and capital adequacy, obligations, information systems and technological infrastructure, share transfers, activities they can perform, the temporary or permanent suspension of their activities, and other principles and rules they must comply with during their operations will be determined by the Board. Obtaining Board permission will be mandatory for share transfers.

Transfers carried out in violation of these regulations will not be recorded in the share ledger, and records made in the share ledger in violation of this provision will be considered void.

Crypto asset service providers will be obliged to make the necessary arrangements, take measures, and establish the necessary internal control units and systems to ensure that their systems are managed securely. In order for the Board to grant permission for the establishment and/or commencement of operations of crypto asset service providers, compliance with the criteria to be determined by TÜBİTAK regarding information systems and technological infrastructure will be sought.

The conditions that the partners of crypto asset service providers must meet are also being established by the bill.

Accordingly, in addition to the conditions that the partners of crypto asset service providers must not be bankrupt, must not have declared a concordat, must not have had a restructuring application through settlement approved, or must not have been granted a postponement of bankruptcy, they must not have a final conviction for the crimes listed in the relevant laws, must not be prohibited from trading; furthermore, they must possess the necessary financial strength and the honesty and reputation required by the business, and the partnership structure must be transparent and clear.

With the bill, it is aimed to ensure the necessary financial strength and the honesty and reputation required by the business by imposing some minimum conditions on the partners and board members of platforms, similar to other capital market institutions.

The authority to regulate the procedures and principles regarding the buying and selling of crypto assets through platforms and their initial sale or distribution; and the exchange, transfer, and custody of crypto assets is granted to the SPK.

Crypto asset service providers will not be subject to other provisions of the Law, except for the provisions referred to. Within the scope of the relevant paragraphs of the Law, the Board will be authorized to regulate and direct the implementation by establishing regulatory procedures and taking special-purpose decisions. In accordance with the relevant articles of the Law, the opinion of the Banking Regulation and Supervision Agency (BDDK) will be obtained for regulations that will impose obligations on banks by the Board.

The SPK will be authorized to establish regulatory procedures, take special and general decisions, and apply measures and sanctions regarding crypto assets that provide rights specific to capital market instruments. The Board may determine principles regarding the sale or distribution of crypto assets created by developing distributed ledger technology or a similar technological infrastructure, whose value cannot be separated from this technology, other than crypto assets providing rights specific to capital market instruments, to be carried out before platforms without being subject to the provisions of the Law regarding capital market instruments.

During the stage of determining the crypto assets that will be subject to these principles, it may request technical reports from TÜBİTAK or from relevant, related institutions and organizations affiliated with ministries and other public institutions to evaluate them in terms of technical criteria. In this context, the approval of the technological features of a crypto asset and the permission for their sale or distribution will not mean a public guarantee of them. The relationships between those who collect money from the public by selling or distributing these crypto assets and those who provide funds to them will be subject to general provisions.

Natural and legal persons who sign any kind of information document prepared and announced as determined by the Board during these transactions will be jointly and severally liable for damages arising from false, misleading, or incomplete information contained in these documents.

The duties and powers of institutions and organizations arising from other legislation regarding crypto assets will remain reserved. The provisions in this bill will not apply to crypto assets other than those traded on platforms within the scope of the principles of the regulation. The provisions of the Law on the Protection of the Value of Turkish Currency and relevant legislation regarding all kinds of transactions made with crypto assets will remain reserved. The Law on Movable Pledge in Commercial Transactions will not apply to pledge agreements involving crypto assets.

PRICES ON PLATFORMS WILL BE FORMED FREELY

The bill establishes the principles regarding the activities of crypto asset service providers and the transfer and custody of crypto assets.

Accordingly, contracts signed between crypto asset service providers and customers who want to trade with them can be established in writing or remotely using remote communication tools, or through methods that the Board determines can replace the written form, whether remote or not, and which will be carried out via an information or electronic communication device and allow for the verification of customer identity, and the procedures and principles regarding this will be determined by the Board.

The Board will be able to make determinations regarding the regulation, scope, amendment, fees and expenses, termination, and cancellation of contracts between crypto asset service providers and their customers, and the minimum issues that must be included in the content of these contracts. Any contract term that eliminates or limits the responsibility of crypto asset service providers towards their customers will be considered invalid.

Platforms will be obliged to establish internal mechanisms to effectively resolve objections and complaints regarding their customers' transactions. Crypto asset service providers will be obliged to identify the identities of customers within the scope of the Law on Prevention of Laundering Proceeds of Crime and other relevant legislation provisions.

It will be mandatory for platforms to establish a written listing procedure regarding the determination of crypto assets that will be traded or initially sold or distributed on their own behalf and the termination of their trading; principles and rules can be regulated by the Board on this matter. In the principles and rules to be determined, technical criteria regarding the technological features of crypto assets may be included by taking the opinion of TÜBİTAK or other institutions and organizations deemed necessary. The fact that a crypto asset has been listed by platforms will not mean a public guarantee of them.

Prices on platforms will be formed freely. Platforms will determine order and transaction principles, establish the necessary surveillance system within their structure, and take all kinds of preventive measures to ensure that transactions are carried out in a reliable, transparent, effective, stable, fair, honest, and competitive manner, and to detect, prevent, and ensure the non-recurrence of market-disrupting actions and transactions.

TRANSACTION RECORDS

They will be obliged to make determinations regarding market-disrupting actions and transactions carried out before the platform, to take necessary measures, including restricting, suspending, and closing accounts that carry out such actions and transactions, and to report the findings reached to the Board by binding them to a report.

The relationships between platforms and their customers and disputes arising between the parties due to transactions carried out on platforms will be subject to general provisions. The fact that platforms have been granted an operating license by the Board will not mean that the transactions are under public guarantee. Crypto assets will not be subject to investor compensation provisions.

Records regarding the wallets where customers' crypto asset transfers are carried out and the accounts where fund transfers are carried out will be kept by crypto asset service providers in a secure, accessible, and traceable manner. The integrity, accuracy, and confidentiality of all transaction records will be ensured. In customers' crypto asset transfer transactions, the regulations made by the Board and the Financial Crimes Investigation Board (MASAK) will be complied with. Information and data foreseen to be included in transfer messages regarding the sender and recipient will be sent securely by crypto asset service providers within the periods determined in the regulations. For this purpose, software applications and technological tools that allow messaging, such as distributed ledger technology, another independent messaging platform, or application interface, can be used.

It will be essential for platforms to keep crypto assets belonging to their customers in the customers' own wallets. It will be mandatory for the custody service regarding crypto assets that customers do not prefer to keep in their own wallets to be provided by banks authorized in accordance with the regulation to be made by the Board and deemed appropriate by the BDDK, or by institutions authorized by the Board to provide crypto asset custody services, and for cash belonging to customers to be kept in banks. The Board will be authorized to determine separate principles for each crypto asset or within the scope of the technological features they are based on or the nature and quantity of the crypto assets regarding custody.

Cash and crypto assets belonging to customers will be separate from the assets of crypto asset service providers, and records will be kept in accordance with this regulation. Cash and crypto assets of customers cannot be seized, pledged, included in the bankruptcy estate, or subject to precautionary measures for the debts of crypto asset service providers, even for public receivables, and the assets of crypto asset service providers cannot be seized, pledged, included in the bankruptcy estate, or subject to precautionary measures for the debts of customers.

The procedures and principles regarding the provision of investment consultancy and portfolio management for crypto assets will be determined by the SPK.

Crypto asset service providers will comply with the principles determined by the Board regarding their publications, announcements, advertisements, and notices, and all kinds of commercial communication.

Crypto asset service providers will be given an authorization certificate showing the activities they will perform. For banks, the favorable opinion of the BDDK will be sought.

Changes are being made to the Capital Markets Law. Accordingly, it will be essential for customer cash held at banks to be monitored in individual account or accounts to be opened for the relevant investment firm's customers, separate from the investment firm's own cash assets.

The principles regarding the accrual of interest on customer accounts at banks will be determined by the SPK. Customer accounts cannot be shown as credit collateral, and encumbrances such as blocks, pledges, and similar cannot be established on these accounts in favor of the investment firm. The responsibility of banks in this context will be limited to notifications made by investment firms. All kinds of administrative and judicial requests such as measures, seizures, and similar regarding customers with balances in these accounts will be notified exclusively to the relevant investment firm and will be fulfilled by the investment firm.

Accounts opened by investment firms at banks for customer cash will be monitored in a separate account in bank accounting. Banks will be obliged to make notifications to the Board in the form and frequency determined by the Board regarding the accounts where investment firm customer cash is recorded. This obligation can also be fulfilled through a system allocated to the Board by the Banking Regulation and Supervision Agency (BDDK).

OBLIGATION FOR SERVICE PROVIDERS TO BE MEMBERS OF THE TURKISH CAPITAL MARKETS ASSOCIATION

It will be mandatory for crowdfunding platforms and crypto asset service providers to be members of the Turkish Capital Markets Association. In this way, it will be ensured that they are represented within a professional organization and that communication with the sector can be established through a single common point. Furthermore, it is also aimed to benefit from the self-regulatory function of the Turkish Capital Markets Association in ensuring the self-discipline of the sectors.

With the bill, the measures to be applied in case it is determined that unauthorized capital market activities are carried out via the internet are being established. Accordingly, due to the problems experienced in determining the content or hosting provider of publications subject to crime committed in the internet environment with developing technology, the domestic-foreign distinction is also being removed in the conduct of unauthorized capital market activities via the internet, in accordance with the removal of the domestic-foreign distinction in crimes where a decision to remove content or block access can be made. The measure of removing content is also being added to the measures to be applied.

When it is determined that unauthorized capital market activities are carried out via the internet, the decision to remove content or block access regarding publications made via the internet will be made by the Board and sent to the Access Providers Association for implementation.

MEASURES TO BE APPLIED IN THE ACTIVITIES OF CRYPTO ASSET SERVICE PROVIDERS

The bill also regulates the measures to be applied in the activities of crypto asset service providers.

Activities carried out by platforms based abroad towards persons residing in Turkey or the offering of a prohibited activity regarding crypto assets to persons residing in Turkey within the scope of regulations to be made by the Board will also be considered unauthorized crypto asset service provision. In the presence of any of the situations of opening a workplace in Turkey by platforms based abroad, creating a Turkish website, or engaging in promotion and marketing activities regarding the offered crypto asset services directly or through persons or institutions residing in Turkey, it will be accepted that the activities are directed towards persons residing in Turkey. Additional criteria regarding the determination that the activities are directed towards persons residing in Turkey may be determined by the Board.

The Board will be authorized to request the strengthening of their financial structures within an appropriate period not exceeding 3 months, or to temporarily suspend the activities of crypto asset service providers directly without giving any period, in case it is determined that they cannot fulfill their cash payment and crypto asset delivery obligations arising from the activities of crypto asset service providers or cannot fulfill them in a short time, or independently of these, their financial structures are weakening significantly or their financial situation has weakened to the extent that they cannot meet their commitments. The Board will also have the authority to revoke their operating licenses and to limit or revoke the signature authorities of managers and employees whose responsibility is determined.

The Board may decide to remove content or block access regarding publications made via the internet in cases where information is obtained that announcements, advertisements, and notices are made via the internet in violation of the principles or prohibitions it has determined, information is obtained that investment consultancy or portfolio management regarding crypto assets is carried out in violation of the principles determined by the Board, and it is determined by the Board that crypto asset service provision activity is carried out via the internet without obtaining permission, and will send the decision to the Access Providers Association for implementation.

In case it is determined that announcements, advertisements, and notices are made through channels other than the internet in violation of the principles determined by the Board, the announcements and advertisements of those responsible may be stopped in accordance with the relevant legislation, and their announcements and advertisements with illegal documents may be collected. The aforementioned transactions will be carried out by the authorized administrations determined in the legislation regarding workplace opening and operating licenses upon the notification of the highest local administrative authority.

INSPECTIONS AND SANCTIONS

The bill establishes the inspection of crypto asset service providers and the sanctions to be applied.

Accordingly, for the inspection of crypto asset service providers, personnel may be assigned from institutions and organizations affiliated with, related to, or associated with ministries and other public institutions upon the request of the Board and with the approval of these institutions and organizations, to carry out inspection activities together with Board personnel or to supervise in a way that provides technical support to those conducting inspection activities as permitted by their own regulations, without the requirement of being professional personnel.

The financial audit and information systems independent audit of crypto asset service providers will be carried out by independent audit firms included in the list announced by the Board. Additional procedures and principles regarding information systems audit will be determined by the Board by taking the opinion of TÜBİTAK or other institutions and organizations deemed necessary. Board personnel and other assigned personnel may accompany every stage of information systems audits to be carried out by authorized institutions within the framework of the program to be determined by the Board, in the capacity of an observer, without compromising the principle of auditor independence.

Those who participate in the inspection in this way will not bear any responsibility regarding the audit results reached by the independent audit firms and will not be able to use the knowledge of the authorized institution for their own benefit or to provide benefit to another authorized institution.

Crypto asset service providers will be responsible for damages arising from the unlawful activities of crypto asset service providers and their inability to fulfill cash payment or crypto asset delivery obligations.

Crypto asset service providers will be responsible for crypto asset losses arising from acts such as the operation of information systems, all kinds of cyber attacks, information security breaches, or any behavior of personnel, within the scope of the relevant provision of the Turkish Code of Obligations. In case the losses cannot be compensated by crypto asset service providers or it is clearly evident that they cannot be compensated; members of the crypto asset service provider will be responsible for the losses to the extent that they can be attributed to them according to their faults and the requirements of the situation, and the relevant provision of the regulation regarding personal liability will be applied.

Damages arising from interruptions in the services provided without the fault of the service providers, cases of temporary inability to transmit orders, or inability to perform transactions or transfers, and similar cases will not be evaluated within this scope.

Administrative fines will be applied to those who engage in acts contrary to the regulations. Accordingly, the "crime of not providing information or documents, obstructing inspection"; "crime of irregularity in legal books, accounting records, financial reports"; "crime of non-compliance with confidentiality obligations regarding information requested in inspection" are also foreseen for crypto asset service providers. In case of sale or distribution in violation of the regulation and relevant regulations, sanctions within the scope of the relevant provisions will also be applied.

All kinds of administrative and judicial requests such as measures, seizures, and similar regarding cash and crypto assets belonging to customers will be fulfilled by crypto asset service providers.

In case cash and crypto assets belonging to customers are seized by judicial authorities, all necessary transactions for the preservation of the seized assets in wallets created before institutions providing custody services authorized by the Board will be established by the judicial authorities.

Within the scope of examinations and inspections carried out under the provisions of the Law titled "market-disrupting actions", "insider trading", and "market fraud", the Board may decide to remove content or block access regarding publications made via the internet, and the decision will be sent to the Access Providers Association for implementation.

With the Bill on Amendments to the Capital Markets Law, which includes regulations regarding crypto assets, the financial statements to be taken into account in the determination of violations and the sanctions to be applied are determined; the authority to regulate the procedures and principles regarding the determination of gross sales revenue and pre-tax profit to be taken as a basis in the determination of the upper limit of the fine is granted to the Capital Markets Board.

Considering that the expense items of the relevant person against whom an administrative fine will be imposed can be freely determined between the parties and that there is no causal link between the administrative fines to be imposed or the amount transferred as hidden gain, it is clarified that the aforementioned expense items will not be taken into account in benefit calculations and that whether the profit is realized or not will not be looked at in the benefit calculation.

In this way, it is aimed to make benefit calculations regarding administrative fines or amounts transferred as hidden gain easier and faster.

Natural persons and officials of legal entities determined to be operating as crypto asset service providers without obtaining permission will be punished with imprisonment from 3 years to 5 years and a judicial fine from 5 thousand days to 10 thousand days.