Turkey Gears Up to Unveil Crypto Regulations in 2024 Amid Regulatory Ambiguity
Summary:
The government of Turkey is slated to introduce cryptocurrency regulations within this year, but the exact timeline remains undetermined. Despite the lack of formal legislation, Turkey has basic regulatory frameworks in place, covering the prohibition of crypto payments and Anti-Money Laundering measures. The expected legislation will mainly focus on regulating crypto exchanges and providing a legal basis for crypto taxation. Turkey, being the fourth-largest crypto market globally, sees these regulatory advancements as crucial to elevate its status from the Financial Action Task Force's "gray list.
Anticipations are high as Turkey, one of the world's largest cryptocurrency markets, is set to unveil new regulations around digital currencies within this year. Earlier this year, Turkish Treasury and Finance Minister Mehmet Simsek indicated that national crypto regulations were nearing finalization. Albeit, the anticipated legislative framework yet remains unrevealed, and the start of regulation which was expected to begin in early 2024 is yet to commence. The present status of the regulatory climate in Turkey is somewhat ambiguous, with several local contributors giving their perspective on the matter.
Although formal crypto legislation is still under wraps, Turkey already has some generalized regulatory frameworks in place. Ismail Hakki Polat, a prominent figure in the country's cryptocurrency sector, points out that the nation currently oversees the digital currency scene through a set of minimal regulations, though these are not legislated by the parliament. The Central Bank of the Republic of Turkey initiated the first of these rules in 2021, restricting cryptocurrency owners from making payments with digital currencies, which are not recognized as legal tender in the country.
The regulation's lack of parliamentary backing raises questions about the penalties for contravention. Polat highlights the ambiguity around potential repercussions to Cointelegraph stating, "no one knows what penalties or fines could be levied for non-compliance." He further conveys this rule is basically without proper enforcement mechanisms, referring to it as "a regulation with no legs on the ground".
In addition, a second regulation geared towards Anti-Money Laundering (AML) is administered under the purview of MASAK, Turkey's financial intelligence unit overseen by the Ministry of Finance. This rule necessitates that digital currency exchanges obtain specific Know Your Customer information from their users to avert illegal dealings such as money laundering and terror financing.
Mindstone Blockchain Labs' CEO, Tansel Kaya, noted that the Capital Markets Board of Turkey – or Sermaye Piyasası Kurulu (SPK) in Turkish – also has a directive in place. He explains that this rule restricts regulated entities from participating in cryptocurrency dealings.
With a trading volume of approximately $170 billion, Turkey is globally recognized as the fourth most significant crypto market. The nation's local currency, the lira, secured a top position on Binance’s most traded cryptocurrency-fiat pair in September last year, accounting for 75% of the total fiat trading volume. This surge in activity was linked to an immense wave of investors joining Turkey's crypto market. Studies have shown that the rate of cryptocurrency adoption in Turkey has effectively doubled, with an estimated 40% of the population engaging in crypto-related activities.
Turkey desires to enact crypto regulations in 2024 primarily to facilitate its removal from FATF’s “gray list” associated with Anti-Money Laundering practices. This list placement came about in October 2021 due to disproportionate regulation of the nonprofit organization sector. Polat explains, to elevate its status from the FATF’s “gray list,” Turkey has to rectify 39 items—one of these pertaining to the crypto industry.
Turkey's impending crypto laws will primarily focus on regulating and licensing crypto exchanges, defined as virtual asset service providers under FATF's terms. The law will set the responsibilities and obligations of these service providers, focusing particularly on ensuring the safe storage of crypto assets to maximize investor protection. The Thodex incident, where a major local crypto exchange abruptly halted trading and withdrawals, rendering losses of up to $2 billion, further underscores this need.
Besides this, Turkey's forthcoming crypto law will also establish the legal basis for crypto taxation. Reports suggest that the government intends to impose low-rate transaction taxes on crypto, and although citizens will be required to declare crypto earnings, the withholding tax rate is expected to be set to zero.
The timing for the introduction of Turkey's crypto law remains undetermined as some industry observers believe it could coincide with a meeting of the U.S. Office of Foreign Assets Control slated for June. This meeting will decide on the status of Turkey's listing on the "gray list". As per Kaya, Turkey's regulations might need to be fully functional before then and are expected to be released in May. Polat, however, expects the law's introduction to occur towards the end of the legislative year—probably by June. If not, it might be delayed until autumn or year-end.
Published At
5/6/2024 3:18:31 PM
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