Crypto asset regulation becomes law

The Bill of Law on Amendments to the Capital Markets Law, which includes regulations regarding crypto assets, was accepted by the TBMM General Assembly and became law. The regulation authorized the CMB for the issuance, sale and distribution of crypto currencies. Persons found to be operating as a crypto asset service provider without permission will be sentenced to imprisonment from 3 to 5 years and a judicial fine from 5,000 days to 10,000 days. 1 percent of the platform revenues will be paid to the CMB and 1 percent to the TÜBİTAK budget. The law adds definitions regarding crypto assets to the Capital Markets Law. Accordingly, "wallet" is defined as software, hardware, systems or applications that enable the transfer of crypto assets and the online or offline storage of these assets or private and public keys related to these assets. According to the law, "crypto assets" are defined as intangible assets that can be created and stored electronically using distributed ledger technology or a similar technology, distributed over digital networks and have a value or right. "Crypto asset service provider" shall be defined as platforms, crypto asset custody service providers and other institutions designated to provide services related to crypto assets, including the initial sale or distribution of crypto assets in the regulations to be made based on this Law, while "crypto asset custody service" shall define the storage, management of crypto assets of platform customers or private keys that provide the right to transfer these assets from the wallet or other custody services to be determined by the Capital Markets Board (CMB). "Platform" shall be defined as institutions where one or more of the crypto asset purchase-sale, initial sale or distribution, exchange, transfer, storage required by these and other transactions that may be determined are carried out. It is intended to authorize the Board to determine the principles for the issuance of capital market instruments as crypto assets without being included in the Central Registry Agency (CRA) system. Accordingly, the Board may determine the principles regarding the issuance of capital market instruments as crypto assets instead of their issuance in dematerialized form in accordance with the provisions of this article and their monitoring in dematerialized form by the CRA in the electronic environment provided by the service providers where they are created and stored. In case of issuance of capital market instruments as crypto assets; records in electronic environment where crypto assets are created and stored will be taken as basis in monitoring the rights, asserting them against third parties and transferring them. The Board may require integration between these electronic environment records and the CRA system. The procedures and principles regarding the implementation of this regulation will be determined by the Board. Crypto asset service providers will obtain permission from the Board According to the regulation, crypto asset service providers will be required to obtain permission from the Board in order to be established and start operating. They will exclusively carry out the activities to be determined by the Board. The principles regarding their establishment and start of operations, their partners, managers, personnel, organization, capital and capital adequacy, liabilities, information systems and technological infrastructures, share transfers, activities they may carry out, temporary or permanent suspension of their activities and other principles and principles that they must comply with during their activities will be determined by the Board. It will be mandatory to obtain the Board’s permission in share transfers. Transfers made in violation of these regulations will not be recorded in the share ledger and the records made in the share ledger in violation of this provision will be deemed invalid. Crypto asset service providers will be obliged to make the necessary arrangements, take precautions and establish the necessary internal control units and systems for the secure management of their systems. In order for the establishment and/or commencement of operations of crypto asset service providers to be permitted by the Board, compliance with the criteria to be determined by TÜBİTAK regarding their information systems and technological infrastructure will be sought. The conditions that the partners of crypto asset service providers must meet are also stipulated by law. Accordingly, in addition to the conditions that the partners of crypto asset service providers must not be bankrupt, have not declared composition, have not had their restructuring application approved by means of reconciliation or have not been subject to a bankruptcy postponement decision, they must not have a final conviction for the crimes listed in the relevant laws, not be prohibited from transactions; on the other hand, have the necessary financial strength and the honesty and reputation required by the business, and the partnership structure must be transparent and open. The authority to regulate the procedures and principles regarding the purchase and sale of crypto assets through platforms and the initial sale or distribution; the exchange, transfer and storage of crypto assets is given to the CMB. Crypto asset service providers will not be subject to other provisions of the Law except for the provisions referred to. Within the scope of the relevant paragraphs of the Law, the Board will be authorized to establish regulatory procedures and make special decisions to regulate and direct the application. In accordance with the relevant articles of the Law, the opinion of the Banking Regulation and Supervision Agency (BDDK) will be obtained for the regulations that will impose obligations on banks. The CMB will be authorized to establish regulatory procedures, make special and general decisions and apply measures and sanctions regarding crypto assets that provide rights specific to capital market instruments. The Board may determine principles regarding the sale or distribution of crypto assets created by the development of distributed ledger technology or a similar technological infrastructure, the value of which cannot be separated from this technology, other than crypto assets that provide rights specific to capital market instruments, through platforms without being subject to the provisions of the Law regarding capital market instruments. In order to make an evaluation in terms of technical criteria at the stage of determining the crypto assets that will be subject to these principles, it may request technical reports from TÜBİTAK or relevant, affiliated institutions and organizations affiliated to ministries and other public institutions. In this context, the approval of the technological features of a crypto asset and the permission for their sale or distribution shall not mean that they are guaranteed by the public. The relations between those who collect money from the public by selling or distributing these crypto assets and those who provide funds to them shall be subject to general provisions. During these transactions, real and legal persons who sign any information document prepared and announced in a manner determined by the Board shall be jointly and severally liable for damages arising from incorrect, misleading or incomplete information in these documents. Prices shall be formed freely on the platforms The Law regulates the activities of crypto asset service providers and the principles regarding the transfer and storage of crypto assets. Accordingly, the contracts signed between crypto asset service providers and customers who want to make transactions in them may be established in written form or by using remote communication tools, or by methods that the Board determines can replace the written form and that will be carried out via an information or electronic communication device and that will allow the verification of the customer identity, and the procedures and principles regarding this shall be determined by the Board. The Board may determine the arrangement, scope, amendment, fees and expenses, termination and cancellation of contracts between crypto asset service providers and their customers, and the minimum matters that must be included in the content of these contracts. Any contractual terms that eliminate or limit the liability of crypto asset service providers to their customers will be deemed invalid. Platforms will be obliged to establish internal mechanisms that will effectively resolve objections and complaints regarding their customers' transactions. Crypto asset service providers will be obliged to identify customers within the scope of the Law on Prevention of Laundering Proceeds of Crime and other relevant legislation. It will be mandatory for platforms to establish a written listing procedure for determining the crypto assets to be traded or first sold or distributed by them and for terminating their trading; the Board may regulate principles and rules in this regard. The principles and rules to be determined may include technical criteria regarding the technological features of crypto assets, after consulting TÜBİTAK or other institutions and organizations deemed necessary. The listing of a crypto asset by platforms will not mean that they are guaranteed by the public. Prices will be freely formed on the platforms. The platforms will determine the order and transaction principles, establish the necessary surveillance system within their own organizations and take all kinds of preventive measures in order to ensure that transactions are carried out in a reliable, transparent, effective, stable, fair, honest and competitive manner, to detect, prevent and prevent market-distorting actions and transactions. Transaction records will be obliged to make determinations regarding market-distorting actions and transactions carried out on the Platform, to take the necessary measures including restricting, suspending and closing the accounts carrying out such actions and transactions, and to report the findings to the Board by attaching a report. The relations between the platforms and their customers and the disputes arising between the parties due to the transactions carried out on the platforms will be subject to general provisions. The fact that the platforms have been granted an operating permit by the Board will not mean that the transactions are under the guarantee of the public. Crypto assets will not be subject to investor compensation provisions. Records regarding the wallets to which customers' crypto asset transfers are made and the accounts to which fund transfers are made will be kept by crypto asset service providers in a secure, accessible and traceable manner. The integrity, accuracy and confidentiality of all transaction records will be ensured. In the crypto asset transfer transactions of customers, the regulations made by the Board and the Financial Crimes Investigation Board will be complied with. The information and data expected to be included in the transfer messages regarding the sender and recipient will be sent securely by crypto asset service providers within the periods specified in the regulations. It will be essential that the crypto assets belonging to the customers of the platforms are kept in the customers' own wallets. Crypto assets kept in banks and cash belonging to customers in this scope will not be subject to the provisions of the insurance of deposits and participation funds regulated in Article 63 of the Banking Law. It will be mandatory for the custody service regarding the crypto assets that customers do not prefer to keep in their own wallets to be provided by banks authorized in accordance with the regulation to be made by the Board and approved by the BRSA or by institutions authorized by the Board to provide crypto asset custody service and for the cash belonging to customers to be kept in banks. The Board will be authorized to determine separate principles regarding custody for each crypto asset or within the scope of the technological features on which they are based or the quality and quantity of crypto assets. The opinion of the BRSA will be obtained for banks Customers' cash and crypto assets will be separate from the assets of crypto asset service providers and the records will be kept in accordance with this regulation. Customers' cash and crypto assets cannot be seized, pledged, included in the bankruptcy estate and no precautionary measures can be taken on them due to the debts of crypto asset service providers, and the assets of crypto asset service providers cannot be seized, pledged, included in the bankruptcy estate and no precautionary measures can be taken on them due to the debts of customers, even for public receivables. The procedures and principles regarding investment consultancy and portfolio management for crypto assets will be determined by the CMB. Crypto asset service providers will comply with the principles determined by the Board regarding their publications, announcements, advertisements and announcements and all kinds of commercial communication. An authorization certificate indicating the activities they will perform will be issued to crypto asset service providers. The favorable opinion of the BRSA will be sought for banks. Imprisonment and fines Officials of real persons and legal entities who are found to be operating as crypto asset service providers without obtaining permission will be given a prison sentence of 3 to 5 years and a judicial fine of 5 thousand to 10 thousand days. The chairman and members of the board of directors and other members of the crypto asset service provider who embezzle money or documents or promissory notes that are entrusted to them or that they are obliged to protect, keep and supervise, other goods or crypto assets for themselves or others due to their duty as crypto asset service providers shall be punished with imprisonment from 8 to 14 years and a judicial fine of up to 5 thousand days; and shall compensate the damages of the crypto asset service provider. 1 percent of the revenues shall be transferred to the CMB, 1 percent to the TÜBİTAK budget. Every year, 1 percent of all revenues of the platforms, excluding the interest revenues of the previous year, shall be paid to the Capital Markets Board and 1 percent to the TÜBİTAK budget to be used in the development of blockchain and related information technologies by the end of May of the relevant year and recorded as income. Accordingly, other principles regarding the accruals and payments to be made shall be determined by the CMB. The practice of recording income to the CMB and TÜBİTAK budget will start to be implemented in 2025 based on the 2024 revenues.