New Crypto Regulations in Turkey: CMB Takes Full Control of Digital Assets

Turkey has unveiled a new set of cryptocurrency regulations, granting the Capital Markets Board (CMB) full authority over crypto platforms. These regulations set specific criteria for Crypto Asset Service Providers (CASPs) before they commence operations. Additionally, the new framework mandates the insurance of user crypto assets, a move aimed at increasing investor protection.

CMB Takes Full Control of Crypto Oversight

The newly introduced Communique on digital asset regulations follows an earlier announcement by Turkish Finance Minister Mehmet Simsek. Earlier, Simsek hinted that the Capital Markets Board (CMB) would take responsibility for new cryptocurrency regulations. This comes after Turkey committed to improving its financial regulatory system, a prerequisite for delisting from the Financial Action Task Force (FATF) gray list.

Turkey never had regulations on cryptocurrency until now. Due to the increasing scams in trading, the government took a groundbreaking step to secure people’s digital assets. With the CMB now regulating, the new legal system should bring stability and security to the sector.

Strict Licensing and Capital Requirements for CASPs

Under the new regulatory regime, anyone seeking to establish and operate as a CASP must meet strict criteria. Founders are required to demonstrate financial integrity and maintain a clean legal record. Failure to meet these conditions may result in the CMB denying an operating license.

The regulations also introduce specific capital requirements that must be fulfilled in cash. The Communique states:

“The establishment capital must not be less than the amount to be determined by the Board, provided that it is not less than the minimum capital amount foreseen in accordance with the Board’s regulations regarding the capital adequacy of crypto asset service providers. Its entire capital must be paid in cash, and its equity capital must not be less than this amount.”

This provision ensures that only financially stable companies operate in the crypto sector, reducing risks for investors and traders.

Strict Actions on Regulations Violation

The CMB has been empowered to sanction CASPs that violate set regulations. Penalties can involve revocation of operating licenses and being barred from dealing with cryptocurrency firms. These are measures aimed at encouraging compliance with the regulations and discouraging fraud.

Simsek emphasized that the main objective of Turkey is to secure the safety of cryptocurrency trading without suppressing technological advancements. The country views the potential offered by blockchain technology and the cryptocurrency market and is attempting to create a regulatory system that encourages innovation without hurting investors.

A Step Towards FATF Compliance

Turkey was grey-listed by the FATF in October 2021 because there were fears that Turkey’s counter-terrorist financing and anti-money laundering efforts were weak. Turkey has since increased financial regulation. In its 2023 report, the FATF recognized that Turkey had increased efforts to remedy compliance failures but that there needed to be a law for the registration or the acquisition of a license by virtual asset service providers (VASPs).

With these new regulations now in place, Turkey is closer to fulfilling FATF’s requirements. Crypto exchanges being licensed by the CMB and having the minimum standards of operation imposed is a significant step toward regulatory compliance and financial stability.

Conclusion

Turkey’s new regulations for cryptocurrency represent a fundamental policy change for the government toward digital assets. The government’s main aim is to provide secure trading to people, hence, it gave CMB the power to impose strict rules on issuing licenses to crypto traders. 

While these rules are designed to stifle illegal activity and investor risk, the doors of Turkey remain open to the advancement of blockchain technology. These kinds of regulatory changes might ultimately position Turkey as a more secure, more transparent cryptocurrency exchange hub.