With exchange rates skyrocketing and inflation in the Turkish economy running high, many citizens have entered the cryptocurrency markets to protect the value of their cash and thus their purchasing power. Cryptocurrencies and their exchange platforms have recently come into sharp focus with many domestic and foreign investors thanks to their many advantages, including low transaction fees, 24/7 transaction capability ease of international money transfers. In the following we will take a look at the position of cryptocurrencies under Turkish law and the related regulations.

First Attempts at Legitimating Cryptocurrencies

In Turkish law, cryptocurrencies were initially governed by the “The Regulation on Prohibiting Payments with Crypto-Assets” (“Regulation”) published in the Official Gazette on April 16, 2021. By this regulation, the Central Bank of the Republic of Turkey (“CBRT”) prohibits the use of crypto assets as a payment instrument in legal transactions. However, none of its articles relates to trade in crypto assets. In addition, the Regulation can be considered ground-breaking as it introduces a definition of “crypto assets” for the first time. Article 3 of the regulation states that “In the implementation of this Regulation, crypto assets are defined as assets created virtually using distributed ledger technology or a similar technology and distributed over digital networks, but are not considered as money, fiat money, electronic money, payment instruments, securities or other capital market instruments.” The Regulation prohibits the following:

• Use of crypto assets, directly or indirectly, in payments
• Providing services for the use of crypto assets, directly or indirectly, in payments
• Provision by payment and electronic money institutions of intermediary services to the platforms offering the trade, deposit, transfer or issuing of services relating to crypto assets or fund transfers from these platforms
• Development by payment service providers of business models enabling the use of crypto assets, directly or indirectly, in the provision of payment services and electronic money issuance, and provision by payment service providers of any services related to such business models

Following this regulation crypto-assets service providers have been regulated as obliged party under the Regulation on Measures Regarding the Prevention of Laundering Proceeds of Crime and Financing of Terrorism. The Financial Crimes Investigation Board (“MASAK”) has published a “Guide” on the fundamental principles for the obligations of  crypto-asset service providers to prevent the laundering of proceeds from crime and terrorist financing. This Regulation and Guide that have now come into force are aimed at preventing the use of cryptocurrencies in terrorist or criminal activities due to their decentralized and untraceable features. All this comes in the wake of one of the biggest cryptocurrency scams in Turkey’s history in 2021 when some 400 thousand people were defrauded of more than $2 billion.

Authorities' View on Cryptocurrencies becoming Positive.

Until now, regulations and official statements were always aimed at preventing or reducing the use of cryptocurrencies. At the end of December 2021, the first draft crypto currency law was announced. The points highlighted by the draft were the following:

• An amendment to the Capital Market Law regarding crypto assets
• First definitions of related concepts such as crypto asset, crypto-asset trading platform, crypto-asset custodian, and crypto-asset service providers
• The Capital Market Board’s authority to determine the crypto assets to be traded on the platforms, to regulate termination of trading, to dispose over the crypto assets for which trading has been terminated, and to allow crypto platforms and service providers to operate

 However, the draft law or any related law has not yet been adopted. 

On January 7, 2022, President Recep Tayyip Erdogan, after meeting with Tesla company CEO Elon Musk, announced that TOGG, the domestic car brand of the Republic of Turkey, will cooperate with the AVAX cryptocurrency network. In addition, on January 26, 2022, the President stated that Turkey should be one of the leading countries in the Metaverse universe.

Conclusion

It seems that Turkey, like other countries, has begun laying the legal groundwork and foundations for cryptocurrencies given their rapidly increasing popularity throughout the world. But given the independent, decentralized and uncontrolled nature of cryptocurrencies, it seems that it will take some time to define the legal nature of these assets and determine the frameworks of legislation to regulate these assets.