Cryptoassets for investment and financingRegulatory threshold
What attributes do the regulators consider in determining whether a cryptoasset is subject to regulation under the laws in your jurisdiction?
The regulatory authorities consider several criteria defined in the legislation to assess whether a cryptoasset is subject to regulation. Presently, none of the regulatory bodies has declared that cryptoassets fully fall under the scope of the regulatory framework.
In Press Release 2013/32, the Banking Regulatory Supervision Authority (BRSA) clearly stated that cryptoassets do not constitute electronic money and, therefore, do not fall under the scope of the Law on Payment and Securities Settlement Systems, Payment Services and Electronic Money Institutions (Law No. 6493). Thus, the BRSA has no authority to supervise business transacted with cryptoassets under Law No. 6493. Reviewing the definition of ‘electronic money’ in Law No. 6493, it is clear that a monetary value can be qualified as electronic money only in cases where the monetary value is:
- issued on the receipt of funds by an electronic money issuer;
- stored electronically;
- used to undertake payment transactions defined in Law No. 6493; and
- accepted as a payment instrument by natural and legal persons.
Therefore, the BRSA does not consider cryptoassets to be electronic money.
Further, the Capital Markets Board of Turkey (CMB), in its letter issued to the Capital Markets Association of Turkey on 1 December 2017, stated that cryptocurrencies are not regulated as a derivative financial instrument within the scope of the Capital Markets Law (Law No. 6362); therefore, Turkish investment institutions must not engage in any spot or derivatives transactions based on cryptocurrencies. According to Law No. 6362, capital market instruments include:
- derivative instruments; and
- other capital market instruments designated by the CMB, including investment contracts.
The CMB does not qualify cryptoassets as derivative instruments, but the following are considered to be securities under Law No. 6362.
- shares, other securities similar to shares and depositary receipts related to these shares;
- debt instruments or debt instruments based on securitised assets and revenues; and
- depository receipts related to these securities.
However, the CMB does not consider these criteria to assess cryptoassets as security. It is likely to assess cryptoassets under capital market instruments by considering criteria included in the definition of capital market instruments as ‘other capital market instruments designated in this context by the CMB’. In this case, the taxation of business transactions involving cryptoassets will also be considered.
Finally, the Regulation Prohibiting Payments Through Cryptoassets (the Regulation on Cryptoassets), which entered into force on 30 April 2021, provides a definition of cryptoassets as 'intangible assets which are created virtually by a technology such as distributed ledger or similar and are distributed through digital networks but cannot be acknowledged as fiduciary money, deposit money, electronic money, payment instrument, security or other capital market instruments'. Thus, the criteria considered in the definition of cryptoassets under the Regulation on Cryptoassets follows the prior statements of the relevant authorities and the applicable regulations.Investor classification
How are investors in cryptoassets classified and treated differently?
Turkish law does not classify cryptoasset investors.Initial coin offerings
What rules and restrictions govern the conduct of, and investment in, initial coin offerings (ICOs)?
Although the Regulation on Cryptoassets establishes a framework for the use of cryptoassets, the legal status of ICOs and the restrictions regarding investment in ICOs remain unclear. However, given that the Regulation on Cryptoassets broadly prohibits the direct or indirect use of cryptoassets in payments, under the applicable legislation the direct and indirect use of cryptoassets in ICOs is not permitted.
Also, in its Resolution No. 47/1102 dated 27 September 2019, the CMB stated that ICOs mostly fall outside the scope of its supervision. The CMB further reiterated that ICOs may have similar aspects to public coin offerings or crowdfunding activities depending on their nature and, in that case, ICOs may fall under the supervision of the CMB. The CMB has also issued the Communiqué on Crowdfunding (III-35/A.2), which regulates fundraising from the public through equity by excluding other similar crowdfunding activities such as ICOs and security token offerings. In accordance with this, if the activity has a similar nature to crowdfunding, it may be subject to the regulatory framework of the CMB. However, at this point, the definition of crowdfunding in the Capital Markets Law is remarkable. According to this definition, crowdfunding can only be done through crowdfunding platforms. Therefore, if an ICO project is characterised as crowdfunding, the ICO process should be carried out not by the entrepreneur but through a crowdfunding platform.Security token offerings
What rules and restrictions govern the conduct of, and investment in, security token offerings (STOs)?
According to Law No. 6362, ‘security’ means:
- shares, securities similar to shares and the depositary receipts related to these shares;
- debt instruments or debt instruments based on securitised assets and revenues; and
- depository receipts related to these securities.
Because securities give their owner the right to a partnership and are purchased and sold for investment purposes, security tokens can qualify as securities under Law No. 6362. However, the CMB has not classified or assessed STOs yet.
In terms of equity token offerings that can be assessed as STOs, there are some restrictions. According to the Turkish Commercial Code numbered 6102 (TCC), non-public joint-stock companies are not required to issue share certificates and shareholding rights arise on the registration of a joint-stock company. In that case, equity token offerings can be realised as shareholder rights based on a token rather than a share certificate. However, in the case of share transfers in a non-public joint-stock company, equity token offerings cannot meet the requirements of the TCC because the transfer of shares without an issued certificate requires written agreement on share transfer, and it is uncertain how the parties will fulfil the requirement to execute a written agreement as described in the TCC. Also, even if a non-public joint-stock company issues share certificates, endorsement and a possession transfer are required to transfer the shares. Thus, equity token offerings cannot meet requirements because they enable investors to obtain shares through the blockchain network. For public joint-stock companies, a similar result will be obtained. Even if a written agreement is not required for share transfers in public joint-stock companies, these transactions are carried out under the supervision of the Central Registry Agency according to Law No. 6362.Stablecoins
What rules and restrictions govern the issue of, and investment in, stablecoins?
No specific rules and restrictions govern transactions with stablecoins in Turkey. However, because stablecoins commit to providing a certain amount of reserve to their investors, this commitment has legal consequences in line with the general provisions of both civil and criminal law. Therefore, stablecoin issuers must conduct their businesses in line with the principle of good faith.Airdrops
Are cryptoassets distributed by airdrop treated differently than other types of offering mechanisms?
No specific classification for cryptoassets distributed by airdrop exists. As for other types of offering mechanism, the legal status of cryptoassets distributed by airdrop is unclear.Advertising and marketing
What laws and regulations govern the advertising and marketing of cryptoassets used for investment and financing?
Even though the Regulation on Cryptoassets establishes a framework for the use of cryptoassets, the advertising and marketing of cryptoassets used for investment and financing are not subject to specific regulations or restrictions. However, in cases where certain types of cryptoassets can be considered securities, individuals and institutions that conduct advertising and marketing activities for cryptoasset investment will be subject to the restrictions set out in the Regulation on Commercial Advertising and Unfair Commercial Practices issued by the Ministry of Trade and the Communiqué on Principles Regarding Investment Services (No. III-37.1).Trading restrictions
Are investors in an ICO/STO/stablecoin subject to any restrictions on their trading after the initial offering?
ICO/STO/stablecoin offerings and trading are not specifically subject to regulation; however, given that the Regulation on Cryptoassets broadly prohibits the direct or indirect use of cryptoassets in payments, under the applicable legislation, direct and indirect payment via cryptoassets during ICOs and STOs is not permitted. Also, in cases where the CMB determines that an offering and its trading qualifies because the issuance of securities, investors will be bound by the requirements and restrictions set out under Law No. 6362 and the Communiqué on Sales of Capital Market Instruments (II-5.2).Crowdfunding
How are crowdfunding and cryptoasset offerings treated differently under the law?
Crowdfunding and cryptoasset offerings are treated differently by the CMB. The CMB has issued the Communiqué on Crowdfunding (III-35/A.2), which entered into force on 27 October 2021 and regulates fundraising from the public through equity. However, the CMB has not regulated cryptoasset offerings yet. Moreover, according to the definition of ‘capital market instruments’ in Law No. 6362, the CMB has the authority to determine and regulate all other new capital market instruments. With Resolution No. 47/1102 dated 27 September 2019, The CMB reiterated that ICOs may have similar aspects to public coin offerings or crowdfunding activities depending on their nature.Transfer agents and share registrars
What laws and regulations govern cryptoasset transfer agents and share registrars?
Although the Regulation on Cryptoassets establishes a framework for the use of cryptoassets, thus far there is no explicit regulation that governs cryptoasset transfer agents and share registrars. However, according to article 37 of Law No. 6362, several investment services (eg, the reception and transmission of orders concerning capital market instruments) must be conducted through a CMB-authorised intermediary. In cases where cryptoassets are qualified as capital market instruments, institutions that receive or transmit a cryptoasset order will be required to obtain authorisation from the CMB in line with the Communiqué on Principles Regarding Investment Services, Activities and Ancillary Services (III-37.1).Anti-money laundering and know-your-customer compliance
What anti-money laundering (AML) and know-your-customer (KYC) requirements and guidelines apply to the offering of cryptoassets?
The Regulation on Measures Regarding Prevention of Laundering Proceeds of Crime and Financing of Terrorism (the Regulation on Prevention of Laundering Proceeds of Crime) was amended in April 2021 and cryptoasset service providers became one of the obliged parties responsible for fulfilling certain obligations involving detailed customer due diligence (KYC) and suspicious transaction reporting (AML) procedures. However, the obligations established under the Regulation on Prevention of Laundering Proceeds of Crime for cryptoasset providers are not specifically designed for the offering of cryptoassets.
Also, MASAK's guide titled 'Main Principles for the Cryptoasset Service Providers Regarding Prevention of Laundering Proceeds of Crime and Financing of Terrorism' (the Guide) includes information on administrative and legal sanctions to be imposed in the case of failing to fulfil the obligations that cryptoasset service providers have as obliged parties under the Regulation. Accordingly, failing to fulfil the obligation of know your customer; the obligation of suspicious transaction reporting and the obligation of regular reporting may result in administrative fines to be imposed by MASAK under the Law on the Prevention of Money Laundering Proceeds of Crime numbered 5549. In addition, MASAK’s Suspicious Transaction Reporting Guideline for Cryptoasset Service Providers, which was published on 18 April 2022, explains procedures for reporting suspicious transactions and the process of sending suspicious transaction reports. Numerous cryptocurrency trading and exchange platforms actively provide services to customers through cooperation with banks in the Turkish market. Accordingly, some of the cryptoasset businesses in the Turkish market appoint compliance officers, establish KYC procedures or prepare documentation in this regard, which became obligatory under the Regulation on Prevention of Laundering Proceeds of Crime.Sanctions and Financial Action Task Force compliance
What laws and regulations apply in the context of cryptoassets to enforce government sanctions, anti-terrorism financing principles, and Financial Action Task Force (FATF) standards?
In Report T-001-3.47 of 20 November 2014, the Financial Crimes Investigation Board of Turkey (MASAK) defined money transfer transactions to purchase Bitcoin as suspicious activity. However, the report only referred to Bitcoin and did not cover other cryptoassets, such as Ethereum. In its Suspicious Transaction Reporting Guideline of 11 September 2019, MASAK amended the definition of a ‘suspicious transaction’ regarding cryptocurrency transactions and declared that transfers made to purchase cryptocurrency will be deemed to be suspicious in cases of:
- carrying out money transfers to national and international cryptocurrency exchanges or real persons’ or legal entities’ accounts in an amount and frequency contrary to the customer’s profile; and
- incoming transfers to clients’ accounts from an unknown source or suspected to result from a cryptocurrency sale that is incompatible with the receiving party’s financial profile.
Under these circumstances, banks or other obliged financial institutions must inform MASAK of suspicious activities. Further, the FATF adopted an interpretive note to Recommendation 15 on New Technologies, clarifying its previous amendments to the international standards on virtual assets. The FATF described how countries and regulated entities must comply with the relevant FATF recommendations to prevent the misuse of virtual assets for money laundering and terrorist financing. As a member of the FATF since 24 September 1991, Turkey recently adopted these recommendations, and the Regulation on Prevention of Laundering Proceeds of Crime has been amended so that cryptoasset service providers are one of the obliged parties responsible for fulfilling certain obligations to prevent money laundering and terrorist financing.