The Draft Law That Makes Certain Amendments on the Capital Markets Law No. 6362, which introduces provisions related to crypto assets and their trading activities on platforms (the “Draft Law”) was submitted to the Turkish Parliament on 16 May 2024.
Principles on the Establishment and Operation of Crypto Asset Service Providers and System Security
As per the Draft Law, “crypto asset” means intangible assets that can be created and stored electronically using distributed ledger technology or similar technology, distributed over digital networks, and representing value or rights.
“Crypto asset service providers” are defined as platforms, entities providing crypto asset custody services, and other entities designated by the regulations on the Capital Markets Law to provide services related to crypto assets, including their initial sale or distribution.
Establishment and Operation: The Draft Law authorizes the Capital Markets Board
(“CMB” or the “Board”) to determine the principles on the issuance of crypto assets, to establish regulatory rules, make decisions and impose sanctions, and lay out the rules regarding the establishment and operation, organizational structure, shareholders, managers and employees, capital, information systems and share transfers of crypto asset service providers.
Accordingly, the Draft Law sets forth that the crypto asset service providers must obtain permission from the CMB for their establishment and commencement of operations and comply with other principles and procedures to be provided by the CMB when carrying out their activities. Online activities related to investment consultancy and/or portfolio management of crypto assets must also be conducted in accordance with the rules to be set forth by the CMB.
Furthermore, some minimum requirements similar to those of other capital market institutions are introduced for the shareholders and board members of platforms in order to ensure that they meet the conditions of financial strength, integrity, and reputation required by the business.
System Security: The Draft Law also provides that, in order for the CMB to grant permission for the establishment and/or commencement of operations, the information systems and technological infrastructures of the platforms to be established must comply with the criteria to be determined by the Scientific and Technological Research Council of Türkiye (“TÜBİTAK”).
Principles That Service Providers Must Comply with During Their Activities
The Draft Law includes provisions for the purposes of enhancing the security and transparency of the activities related to crypto assets.
Agreements with the Clients: As per the Draft Law, agreements between crypto asset service providers and their clients must be in written form or may be executed remotely via remote communication tools, or, whether remotely or not, also by means of methods that the Board determines to be a substitute for the written form and through an information or electronic communication device that allows for the verification of the clients’ identity.
Resolution of Client Complaints: Crypto asset service providers must establish the necessary infrastructure to effectively resolve client complaints and perform identification of clients.
Custody/Storage: In principle, it is accepted that the customers will keep their crypto assets in their own wallets; and crypto asset service providers are obliged to keep the records related to them in a secure, accessible, and traceable manner.
In cases where clients do not prefer to store crypto assets in their own wallets, the custody services for the relevant crypto asset must be provided by (i) the banks authorized by the CMB and approved by the Banking Regulation and Supervision Agency, or (ii) other institutions authorized by the CMB to provide crypto asset custody services.
No Attachment or Pledge of the Assets: It is regulated that cash and crypto assets belonging to customers are separate from the assets of service providers and cannot be seized, pledged, included in the bankruptcy estate, or subjected to any injunction due to the debts of the service provider. Moreover, the cash of the clients held in banks must be monitored separately from the investment institution’s own funds, and the client accounts must not be utilized as loan collateral or encumbered in favor of the investment institution.
Fees: While the Draft Law does not address taxation matters, it stipulates that, as of 2025, 1% of the annual revenues (excluding interest income from the previous year) of the platforms must be recorded as revenue to the CMB and the budget of TÜBİTAK each year.
Measures to be Applied to the Activities of Service Providers
Financial Status: The Board must be authorized to take the following actions in cases where it determines that the financial status of the crypto asset service provider has or is about to deteriorate: (i) request the strengthening of its financial status within a given period,
(ii) temporarily suspend its activities without granting any cure period, (iii) revoke its operational authorizations, (iv) limit or revoke the signature authorizations of its managers and employees.
Unauthorized Activities: The Board must also have the authority to remove content and/or block access to the publications if it identifies that (i) notices, advertisements, and announcements are disseminated over the internet in violation of the regulations, (ii) investment consultancy and/or portfolio management for crypto assets is conducted in violation of the regulations, or (iii) crypto asset service provider activities are offered via internet without permission. Similarly, the Board is authorized to suspend and recall the notices, advertisements, or documents if it is identified that they have been disseminated through media channels other than the internet in violation of the regulations.
Principles Applicable to the Activities of Platforms Residing Abroad
As per the Draft Law, activities and promotions conducted by platforms residing abroad that target residents in Türkiye must be deemed as unauthorized crypto asset services and measures provided under Article 99 of the Capital Markets Law, including the suspension of activities, must be imposed on them. Accordingly, the Draft Law sets forth that the following activities of such platforms must be deemed to target residents in Türkiye and therefore, must be subject to additional measures to be determined by the Board: establishing a place of business in Türkiye, creating a website in Turkish and directly or indirectly engaging in promotional and marketing activities regarding the services offered.
Audit, Liability and Sanctions
Independent Audit: The Draft Law stipulates that the financial audit and independent audit of information systems of crypto asset service providers must be carried out by independent audit institutions included in the list to be published by the Board. Additional procedures and principles concerning the audit of information systems will be determined in consultation with TÜBİTAK or other institutions or organizations if deemed necessary.
Further, it is regulated in the Draft Law that service providers will be specifically audited for compliance with the legislation.
Liability: Crypto asset service providers must be liable for damages or losses that may arise from their unlawful activities and failure to fulfill their cash payment and/or crypto asset delivery obligations, or the operation of information systems, cyber-attacks, and information security breaches, or any conduct of their employees. Individual members of the crypto asset service providers (e.g. directors) may be held personally liable in cases where damages or losses cannot be compensated by the service providers themselves.
Sanctions: The Board must be authorized to impose administrative fines on crypto asset service providers in case of breach of the Board’s regulations on crypto asset service providers, crypto assets and the transfer and custody of crypto assets, or the secondary regulations to be made by the Board. Furthermore, provisions of the Capital Markets Law concerning the failure to provide information and documents, the offence of obstruction of audit, the offence of irregularity in legal books, accounting records, financial statements and reports, the obligation to keep confidentiality, and the written application and special investigation procedures must also apply to crypto asset service providers.
In addition to administrative fines, the Draft Law envisages imprisonment and judicial fines for real persons and legal entities that are found to be operating as crypto service providers without obtaining authorization from the Board.
Provisions on Enforcement and Transition
If the Draft Law enters into force as is, those who are currently carrying out crypto asset service provider activities must apply to the CMB within 1 month, and those who want to start their activities must apply to the CMB and obtain an activity license before commencing their activities. Crypto asset service providers that are currently/actively providing such services must make a liquidation decision within 3 months at the latest if they do not apply for an activity license. The procedures and principles regarding the application for an activity license will be established by secondary regulations to be issued by the Board within 6 months from the entry into force of the Draft Law.
Crypto asset service providers that are residing abroad must cease their activities targeting Turkish residents within 3 months following the entry into force of the Draft Law.
The activities of electronic transaction devices such as ATMs, which allow clients to convert crypto assets into cash or vice versa and allow the transfer of crypto assets, will be terminated within 3 months following the entry into force of the Draft Law.
PARTNER
Müşavvir Enerji / Elektrik Petrol ve Doğal Gaz Madencilik Taşımacılık ve Lojistik Kamu Özel İşbirlikleri ve İmtiyazlar İnşaat ve Altyapı Finansal Hizmetler Projeler ve Proje Finansmanı Bankacılık ve Finans Şirketler ve Ticaret Hukuku Sermaye Piyasası Hukuku Kamu İhale Hukuku Gayrimenkul Hukuku
SENIOR ASSOCIATE
Avukat Tüketim Ürünleri Enerji / Elektrik Madencilik Savunma Şirketler ve Ticaret Hukuku Birleşme ve Devralmalar Dava ve Uyuşmazlık Çözümleri
ASSOCIATE
Stajyer Avukat
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