INTRODUCTION

It is understood that the Law Amending the Capital Markets Law No. 6362, which was adopted by the Grand National Assembly of Türkiye on 26 June 2024, introduces regulations concerning the activities of crypto asset service providers and platforms, the custody of crypto assets, and the trading and transfer transactions that individuals residing in Türkiye may carry out on crypto asset platforms. The law further stipulates that crypto asset service providers must obtain authorization from the Capital Markets Board (“the Board”) in order to be established and operate. Additionally, the rules to be followed during these activities will be determined through secondary legislation to be issued based on the newly added provisions to the Capital Markets Law (“CML” or “the Law”).

This article will outline the urgent compliance measures that companies currently operating as crypto asset service providers in Türkiye must undertake in accordance with the Law.

Transitional Provisions for Crypto Asset Service Providers under Provisional Article 11 of the Capital Markets Law

1. Obligations Envisioned for the Period Between the Entry into Force of the Law and the Implementation of Secondary Regulations

1.1 Obligation to Submit a Declaration of Compliance with the Requirements to Be Set Forth in the Secondary Regulation for Obtaining an Operating License

Institutions operating as crypto asset service providers on the date the Law enters into force that choose to submit a declaration to the Board within one month from the effective date, stating their intention to apply for an operating license, are required to declare their commitment to meeting the conditions that will be set forth in the secondary legislation to be issued under Articles 35/B and 35/C of the Law.

It has been stated that the secondary regulations to be enacted by the Board will include provisions under Article 35/B of the Law concerning the “establishment and commencement of operations of crypto asset service providers, their shareholders, managers, staff, organization, capital, capital adequacy, liabilities, information systems and technological infrastructure, share transfers, activities they may undertake, the suspension of their activities either temporarily or permanently, as well as other principles and requirements they must comply with during their operations.” Additionally, under Article 35/C of the same Law, regulations will also be made regarding the “principles governing the operations of crypto asset service providers and the transfer and custody of crypto assets.”

Additionally, according to paragraph 5 of Article 35/B of the Law, “Crypto asset service providers are not subject to the other provisions of this Law except for those provisions explicitly referenced in this Law.” This clearly indicates that provisions of the Law that do not explicitly mention crypto assets cannot be applied to matters related to crypto assets. The exemption of crypto asset service providers from many provisions of the Capital Markets Law (CML) and this regulation, which is inconsistent with the general rationale of the Law, will result in future regulations in the sector being inadequate and fragmented. The crypto asset market has dynamics that differ from traditional financial markets and is characterized by rapid changes and innovations. It is possible for crypto assets to be issued, used, and subject to activities by crypto asset service providers within the scope of existing legal regulations. Therefore, we believe that establishing a prohibitive provision that limits the potential application of other provisions of the CML to crypto asset service providers, when conditions are met, could create significant concerns.

On the other hand, expecting the essential elements of the norm, such as obtaining an operating license, capital adequacy, or organizational requirements for crypto asset service providers, to be detailed through secondary regulations instead of being directly regulated by the law may be considered problematic from the perspective of legislative technique, as it could involve issues related to the principle of proportionality and interference with property rights. As is known, similar principles have been directly and specifically regulated within the framework of Law No. 6493 on Payment and Securities Settlement Systems, Payment Services, and Electronic Money Institutions, which pertains to payment services providers with a similar level of connection to crypto asset service providers. In light of this, it is believed that, in terms of legislative technique, the legislator's approach could potentially lead to future public rights losses. As is known, similar principles have been directly and specifically regulated within the framework of Law No. 6493 on Payment and Securities Settlement Systems, Payment Services, and Electronic Money Institutions, which pertains to payment services providers with a similar level of connection to crypto asset service providers.

1.2. Obligation to Submit a Declaration to Decide on Liquidation Within Three Months Without Harming Client Rights and Interests, and to Refrain from Accepting New Clients During the Liquidation Process

Institutions operating as crypto asset service providers on the date the Law enters into force that choose not to submit a declaration within one month indicating their intent to apply for an operating license will instead be required, within the same one-month period, to declare that they will decide to liquidate their institutions within three months and will refrain from accepting new clients during the liquidation process. It is understood that the three-month period for making the liquidation decision will begin as of the date of the declaration. In the event that no specific regulation regarding the liquidation process is set forth in the secondary legislation issued by the Board, it is anticipated that the provisions of the Turkish Commercial Code concerning liquidation will apply.

1.3. Obligation to Submit a Declaration of Compliance with the Necessary Conditions to Be Specified in the Secondary Regulation for Institutions Intending to Commence Operations After the Entry into Force of the Law

Institutions that are not operating as crypto asset service providers on the date the Law enters into force but intend to commence operations thereafter are required to declare that, prior to initiating their activities, they will fulfill the conditions to be stipulated in the secondary legislation and apply to the Board to obtain an operating license.

1.4. Sanctions Prescribed for Failure to Fulfill the Obligations Envisaged During the Interim Period Between the Entry into Force of the Law and the Entry into Force of the Secondary Legislation

Institutions that fail to fulfill the obligation to submit a declaration stating that they will apply for an operating license, or that do not decide on liquidation within the three-month period, may be subject to sanctions under Articles 99/A and 109/A of the Capital Markets Law (CML), depending on the nature of the relevant act.

Pursuant to the first sentence of Article 99/A(1) of the Capital Markets Law (CML), titled “Measures to Be Taken Against Unlawful Activities and Transactions of Crypto Asset Service Providers”, the Capital Markets Board, by reference to Article 96 of the CML, is authorized to require the relevant parties to rectify the violations within a period determined by the Board and to ensure compliance with the Law and the institution’s operational objectives and principles. Moreover, the Board may decide to restrict or temporarily suspend the scope of activities of the institutions, revoke their authorizations either entirely or with respect to certain capital markets activities, or impose any other measures it deems appropriate. Additionally, the Board may temporarily or permanently revoke the licenses of managers and employees found responsible for the unlawful activities or transactions, restrict or remove their signing authority from the date of the decision to file a criminal complaint until the conclusion of judicial proceedings, and dismiss members of the board of directors whose responsibility is established by a court ruling, appointing replacements until the next general assembly meeting.

Pursuant to the reference made in the first sentence of Article 99/A(1) of the Capital Markets Law (CML) regarding the measures to be applied in the event of unauthorized crypto asset service provider activities, the Capital Markets Board is authorized to take all necessary measures to halt unauthorized crypto asset service activities. Without prejudice to all legal and criminal liabilities, the Board is also entitled to initiate legal proceedings within one year from the date such activities are identified and in any event within five years from the date of occurrence, in order to cancel the consequences arising from unauthorized capital markets activities and transactions and to ensure the return of cash or capital markets instruments to their rightful owners. Furthermore, individuals and legal entities engaging in unauthorized crypto asset service provider activities, as well as shareholders and directors held liable by the Board in this context, may be subject to the analogous application of Article 96(2) of the CML. In cases where such unauthorized activities are conducted via the internet and the content and hosting providers are located within Türkiye, access to the relevant websites may be blocked by court order upon the Board’s request, in accordance with the applicable legislation. If the content and hosting providers are based abroad, access may be blocked by the Information and Communication Technologies Authority upon the Board’s request. In cases where funds are collected from the public without the Board’s authorization through crowdfunding platforms, or where leveraged transactions—or derivative transactions deemed subject to the same legal provisions—are carried out via the internet targeting residents of Türkiye, the Information and Communication Technologies Authority may block access to the relevant websites upon the Board’s request.

Pursuant to the reference made in the first sentence of Article 99/A(1) of the Capital Markets Law (CML), regarding unauthorized crypto asset service provider activities, it is understood that the Capital Markets Board (the “Board”) is also authorized under Article 100(1) of the CML to take specific actions concerning advertisements, promotional statements, and all commercial communications made by those engaging in such unauthorized activities. In cases where the Board determines that persons or entities—despite operating without authorization as crypto asset service providers, having their licenses revoked, their activities suspended, or their branches shut down—continue to use words or expressions in their trade names, advertisements, or promotions that create the impression that they are engaged in capital market activities, criminal proceedings may be initiated against the responsible parties. Moreover, in urgent circumstances where delay would be detrimental, the Board may order the cessation of such advertisements and promotional materials, request the seizure of unlawful documents, announcements, and advertisements, and, upon the Board’s request, the highest-ranking local administrative authority may decide to temporarily close the workplaces of those responsible.

Within the scope of the first sentence of Article 99/A of the Capital Markets Law, the sanctions stated in the remaining provisions of Article 99/A—apart from the referenced Articles 96, 99, and 100/1 of the Law—shall be specifically applied to those engaging in unauthorized crypto asset service provider activities.

If organizations that choose to liquidate or fail to apply to the Board within the designated period are unable to fulfill their clients' transfer requests for assets in their accounts, this constitutes an unauthorized service provision crime under Article 109/A. In disputes arising from these transfer requests, general provisions will apply.

2. Obligations Envisaged Following the Entry into Force of Secondary Regulations

The secondary regulations to be issued under the Law will determine the specifics of these obligations. Following the entry into force of the secondary regulations, newly established entities will not be permitted to operate without obtaining an operating license. Organizations that were providing crypto asset services at the time the Law came into effect and have declared their intention to apply for an operating license must submit their applications to the Board within the period stipulated in the secondary legislation.

The Board may grant a specific period for the completion of authorization procedures regarding operating license applications submitted by crypto asset service providers that were active before the Law came into force. If these entities fail to obtain an authorization certificate within the given timeframe, the Board may require them to cease their operations.

3. Obligations of Foreign-Based Crypto Asset Service Providers

Crypto asset service providers based abroad are required to cease all activities directed at individuals in Türkiye within three months following the enactment of the Law. Pursuant to Article 99/A, paragraph 1 of the Capital Markets Board (CMB), it shall be deemed an unauthorized crypto asset service if foreign platforms offer services to persons in Türkiye or engage in prohibited activities related to crypto assets aimed at individuals in Türkiye. Furthermore, the establishment of a workplace in Türkiye, the creation of a Turkish-language website, or any promotional or marketing activities conducted directly or through intermediaries in Türkiye regarding crypto asset services shall be considered as targeting individuals in Türkiye.

4. Obligations Regarding the Operations of ATMs and Similar Devices

The operations of ATMs and similar devices that allow customers to convert crypto assets to cash or vice versa must be terminated within three months from the date the Law comes into effect. ATMs that do not cease operations will be shut down by the highest local administrative authorities of the relevant area, and those who continue to use these devices will be subject to the provisions of Articles 99/A and 109/A.

5. Recording Income to the Budget of the Board and TÜBİTAK

According to Article 130 of the Capital Markets Board (CMB), the practice of recording income from platforms into the budgets of the Board and TÜBİTAK will begin to be applied starting in 2025, based on the revenues of 2024. According to Article 130/4 of the CMB, starting from the following year, crypto asset service providers are required to record an amount, determined by the Board, as income for the Board’s budget, which will be up to ten percent of all their revenues, excluding interest income, for each calendar year. The timing and amounts of these payments will be notified to the relevant crypto asset service provider by the Board, at least thirty days in advance, considering the cash status of the Board in the calendar year following the year in which the income was earned. Amounts not requested within a calendar year will be added to the amount to be paid in the following years and can be requested by the Board in the same manner.

6. Enforcement of Secondary Regulations

Under Articles 35/B and 35/C of the Law, secondary regulations to be issued must be enforced within six months from the effective date of the Law, as mandated by the Board.

CONCLUSION

The Law on crypto asset service provides includes critical steps to align with existing regulations in Türkiye. Crypto service providers will be required to take significant compliance measures under this Law. This process mandates the fulfillment of obligations set by both the transitional provisions and secondary regulations.

In particular, it is crucial for crypto asset service providers to submit the necessary applications to obtain operational licenses or decide on liquidation within the specified timeframe. Additionally, with the enactment of new regulations, foreign platforms must terminate their operations in Türkiye, and ATMs and similar devices in Türkiye must cease their activities.

It is crucial for the CMB to strictly enforce these regulations to ensure order in the sector and protect investors. The termination of activities by organizations that fail to obtain an operational license within the deadlines set by the CMB, along with the imposition of sanctions on those engaged in unauthorized activities, will enhance the reliability of the market.

On the other side, the timely enactment of secondary regulations plays a critical role in resolving uncertainties in the sector and ensuring that all stakeholders comply. These regulations will include detailed rules across a broad range, from the establishment and operational conditions of crypto asset service providers to the protection of customer rights. Therefore, it is crucial for crypto asset service providers and organizations planning to enter the sector to develop their compliance policies thoroughly, with support from specialized legal professionals and sector experts.

The Law amendment in question will make the operations of crypto asset service providers in Türkiye more regulated and supervised. In this process, it is crucial for service providers and other relevant parties to fully comply with the regulations for the sustainability and reliability of the sector. The Board’s effective oversight and guidance rule will ensure that this transformation takes place in a healthy manner.