Law on crypto assets in the Official Gazette

The Law on Amendments to the Capital Markets Law, which includes regulations on crypto assets, was published in the Official Gazette. The Law on Amendments to the Capital Markets Law, which includes regulations on crypto assets, was published in the Official Gazette and entered into force. Accordingly, a "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, a "crypto asset" is defined as an intangible asset that can be created and stored electronically using distributed ledger technology or similar technology, distributed over digital networks, and has the ability to express value or rights. "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 According to the Regulation, crypto asset service providers must 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 perform, temporary or permanent suspension of their activities and other principles and principles 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 infrastructures 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, must not be prohibited from trading; on the other hand, they must have the necessary financial strength and the honesty and reputation required by the business, and the partnership structure must be transparent and open. The law aims to provide the partners and board members of platforms with certain minimum conditions similar to other capital market institutions, and to ensure the necessary financial strength and the honesty and reputation required by the business. 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 granted to the CMB. Crypto asset service providers will not be subject to other provisions of the Law other than the referred provisions. Within the scope of the relevant paragraphs of the Law, the Board will be authorized to regulate and direct the implementation by establishing regulatory procedures and making special decisions. In accordance with the relevant articles of the Law, the opinion of the Banking Regulation and Supervision Agency (BRSA) 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 the principles regarding the sale or distribution of crypto assets created through 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 assessment in terms of technical criteria during the determination of crypto assets that will be subject to these principles, it may request a technical report from TÜBİTAK or related, 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 will 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 will be subject to general provisions. During these transactions, real and legal persons who sign any kind of information document prepared and announced in a manner determined by the Board will be jointly and severally liable for damages arising from incorrect, misleading or incomplete information in these documents. The duties and authorities of institutions and organizations arising from other legislation regarding crypto assets will be reserved. The provisions of this law will not apply to crypto assets other than crypto assets traded on platforms within the scope of the principles within the scope of the regulation. The provisions of the Law on the Protection of the Value of Turkish Currency and relevant legislation regarding all kinds of transactions made with crypto assets will be reserved. The Law on Movable Pledges in Commercial Transactions will not apply to pledge agreements involving crypto assets. Prices will be freely formed on platforms The law regulates the activities of crypto asset service providers and the principles regarding the transfer and storage of crypto assets. Accordingly, contracts signed between crypto asset service providers and customers who want to make transactions in them can be established in written form or by using remote communication tools, or by methods that the Board determines can replace the written form and will be carried out via an information or electronic communication device and will allow verification of customer identity, and the procedures and principles related to this will be determined by the Board. The Board may determine the arrangement, scope, amendment, fees and expenses, termination, and termination of the 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 the objections and complaints of their customers regarding their 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 the platforms to create 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 receiving the opinion of TÜBİTAK or other institutions and organizations deemed necessary. The listing of a crypto asset by the platforms will not mean that it is guaranteed by the public. Prices will be formed freely on the platforms. The platforms will determine the order and transaction principles, establish the necessary surveillance system within their own bodies 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, and to detect, prevent and prevent market-distorting actions and transactions. Transaction records shall 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 reached to the Board by including them in 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 shall be subject to general provisions. The fact that the platforms have been granted an operating permit by the Board shall not mean that the transactions are under the guarantee of the public. Crypto assets shall 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 shall be kept by crypto asset service providers in a secure, accessible and traceable manner. The integrity, accuracy and confidentiality of all transaction records shall be ensured. The regulations made by the Board and the Financial Crimes Investigation Board Presidency shall be complied with in the crypto asset transfer transactions of customers. The information and data intended to be included in the transfer messages regarding the sender and recipient shall be sent securely by crypto asset service providers within the periods specified in the regulations. For this purpose, software applications and technological tools that enable messaging, such as distributed ledger technology, another independent messaging platform or application interface, can be used. 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 that the custody service for crypto assets that customers do not prefer to keep in their own wallets 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 that the cash belonging to customers be kept in banks. The Board will be authorized to determine separate principles for 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. Cash and crypto assets belonging to customers 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, or have precautionary measures taken against them, even if they are for public receivables 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, or have precautionary measures taken against them due to the debts of customers. 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 appropriate opinion of the BRSA will be sought for banks. The principles regarding the interest accrual of customer accounts in banks will be determined by the CMB. According to the law, it will be essential that customer cash held in banks will be monitored separately from the investment institution’s own cash assets in individual accounts to be opened for the customers of the relevant investment institution. The principles regarding the interest accrual of customer accounts in banks will be determined by the CMB. Customer accounts cannot be shown as collateral for loans, and no blockages, pledges or similar restrictions can be established on these accounts in favor of the investment institution. The responsibility of banks in this context will be limited to the notifications made by investment institutions. All kinds of administrative and judicial demands such as precautions, seizures and similar requests regarding customers whose balances are in these accounts will be exclusively reported to the relevant investment institution and will be fulfilled by the investment institution. Accounts opened by investment institutions with banks for customer cash will be monitored in a separate account in the bank accounting. Banks will be obliged to notify the Board regarding the accounts where investment institution customer cash is recorded in the manner and frequency determined by the Board. This obligation can also be fulfilled through a system allocated to the Board by the Banking Regulation and Supervision Agency (BDDK). Requirement for service providers to be members of the Capital Markets Association of Turkey Crowdfunding platforms and crypto asset service providers will be required to be members of the Capital Markets Association of Turkey. In this way, they will be represented within a professional organization and will be able to communicate with the sector through a single common point. In addition, it is also aimed to benefit from the self-regulatory function of the Capital Markets Association of Turkey in ensuring the self-discipline of the sectors. The law stipulates the measures to be implemented in case it is determined that unauthorized capital market activities are being conducted via the internet. Accordingly, in accordance with the removal of the domestic-international distinction in crimes where the decision to remove content or block access may be made due to problems experienced in determining the content or location provider of publications subject to crime committed in the internet environment with the developing technology, the domestic-international distinction is also being removed in the execution of unauthorized capital market activities via the internet. The measure to remove content is also being added to the measures to be implemented. In the event that it is determined that unauthorized capital market activities are being conducted via the internet, the Board will decide on the removal of content or block access to publications made via the internet and will be sent to the Access Providers Association for implementation. Measures to be implemented in the activities of crypto asset service providers The law also regulates the measures to be implemented in the activities of crypto asset service providers. Platforms located abroad engaging in activities targeting Turkish residents or offering a prohibited activity related to crypto assets to Turkish residents within the scope of regulations to be made by the Board will also be considered unauthorized crypto asset service provision. In the event that any of the following situations exist: opening a business in Turkey, creating a Turkish website, or engaging in promotional and marketing activities directly or through persons or institutions located in Turkey regarding the crypto asset services offered by platforms located abroad, the activities will be deemed to be targeted at Turkish residents. Additional criteria for determining that the activities are targeted at Turkish residents may be determined by the Board. In the event that crypto asset service providers are unable to fulfill their cash payment and crypto asset delivery obligations arising from their activities or will not be able to fulfill them in a short time, or independently of these, their financial structures are seriously weakened or their financial situation has weakened to the extent that they cannot meet their commitments, the Board will be authorized to request that their financial structures be strengthened within an appropriate period of time not exceeding 3 months or to temporarily suspend the activities of crypto asset service providers directly without granting any period. The Board will also have the authority to revoke their activity authorizations, limit or revoke the signature authorities of managers and employees who are found responsible. In cases where information is obtained regarding the announcement, advertisement and notice being made on the internet in violation of the principles or prohibitions it has determined, information is obtained regarding the investment consultancy or portfolio management of crypto assets in violation of the principles determined by the Board, or the Board determines that crypto asset service provision activities are carried out on the internet without obtaining permission, the Board may decide to remove the content or block access to the publications made on the internet and send the decision to the Access Providers Association for implementation. In cases where it is determined that announcement, advertisement and notice are made on media other than the internet in violation of the principles determined by the Board, the announcements and notices of those responsible may be stopped in accordance with the relevant legislation, and the announcements and notices with illegal documents may be collected. The said procedures will be carried out by the authorized administrations specified in the legislation regarding business opening and work licenses upon the notification of the highest local civil administrator. Inspection and sanctions The law stipulates the inspection of crypto asset service providers and the sanctions to be applied. Accordingly, upon the request of the Board, personnel from relevant, related institutions and organizations affiliated to ministries and other public institutions may be assigned with the approval of these institutions and organizations to perform audit activities together with the Board personnel for the audit of crypto asset service providers or to supervise those conducting audit activities in a manner that their own regulations allow, without the requirement of being professional personnel, in a manner that provides technical support. The financial audit and independent audit of information systems of crypto asset service providers will be conducted by independent audit organizations included in the list announced by the Board. Additional procedures and principles regarding information systems audit will be determined by the Board after receiving the opinion of TÜBİTAK or other institutions and organizations deemed necessary. The Board personnel and other assigned personnel may accompany each stage of information systems audits conducted by authorized institutions within the framework of the program to be determined by the Board, as observers, without undermining the principle of auditor independence. In this way, those participating in the audit will not be responsible for the audit results reached by the independent audit organizations and will not be able to use the knowledge of the authorized organization to benefit themselves or another authorized organization. Crypto asset service providers will be liable for damages arising from unlawful activities of crypto asset service providers and failure to fulfill cash payment or crypto asset delivery obligations. Crypto asset service providers will be liable for crypto asset losses arising from acts such as the operation of information systems, all kinds of cyber attacks, information security violations or any behavior of personnel within the scope of the relevant provision of the Turkish Code of Obligations. If the losses cannot be compensated from crypto asset service providers or if it is clearly evident that they cannot be compensated, the crypto asset service provider members will be liable for the losses to the extent that they can be attributed to them according to their faults and the requirements of the situation, and the relevant provision of the regulation will be applied regarding personal liability. Damages arising from interruptions in the services provided without the fault of the service providers, temporary failure to transmit orders or failure to make transactions, transfers and similar situations will not be evaluated within this scope. Administrative fines will be imposed on those who act contrary to the regulations. Accordingly, the crimes of "not providing information, documents, obstructing audit", "crimes of irregularities in legal books, accounting records, financial reports", "crimes of failure to comply with confidentiality obligations regarding information requested in audit" are also foreseen for crypto asset service providers. In case of sale or distribution in violation of the regulation and relevant regulations, sanctions within the scope of the relevant provisions will be applied. All kinds of administrative and judicial demands such as precautions, seizures and similar regarding cash and crypto assets belonging to customers will be fulfilled by crypto asset service providers. In case cash and crypto assets belonging to customers are seized by judicial authorities, all necessary procedures for the storage of seized assets in wallets created by institutions providing custody services authorized by the Board will be established by the judicial authorities. Within the scope of the examinations and audits conducted within the scope of the provisions of the Law titled “market distorting actions”, “information abuse” and “market fraud”, the Board may decide to remove content or block access to publications made via the internet and the decision will be sent to the Access Providers Association for implementation. Detection of non-conformities and sanctions to be applied According to the Law, the financial statements to be taken into consideration in the detection of non-conformities and the sanctions to be applied are determined; the authority to regulate the procedures and principles regarding the determination of gross sales revenue and pre-tax profit to be taken as basis in determining the upper limit of the penalty is granted to the Capital Markets Board. Considering that the expense items of the relevant person against whom an administrative fine will be imposed can be freely determined between the parties and that there is no causal link with the administrative fines to be imposed or the amount transferred as hidden profit, it is clarified that the expense items in question will not be taken into account in the benefit calculations and that whether or not the profit is realized in the benefit calculation will not be considered. In this way, it is aimed to make the calculation of benefits regarding the amount transferred as administrative fines or hidden profits easier and faster. Natural persons and officials of legal entities who are found to be operating as crypto asset service providers without permission will be punished with imprisonment from 3 to 5 years and a judicial fine from 5 thousand days to 10 thousand days. Embezzlement in crypto asset service providers 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, other goods or crypto assets entrusted to them or which they are responsible for protecting, safekeeping and monitoring due to their duty as a crypto asset service provider will be punished with imprisonment from 8 to 14 years and a judicial fine of up to 5 thousand days; they will compensate the damages of the crypto asset service provider. If the crime is committed through fraudulent behavior aimed at preventing the embezzlement from being revealed, the perpetrator will be sentenced to imprisonment from 14 to 20 years and a judicial fine of up to 20 thousand days. However, the amount of the judicial fine cannot be less than three times the damage suffered by the crypto asset service provider and its customers. If the real person partners of a crypto asset service provider whose operating license has been revoked, who have legally or de facto management or control over it, use the resources of the crypto asset service provider or its customers directly or indirectly for their own benefit or the benefit of others in a way that endangers the safe operation of the crypto asset service provider in any way, and cause damage to the crypto asset service provider or its customers, it will be considered as embezzlement. Those who commit these acts will be sentenced to imprisonment from 12 to 22 years and a judicial fine of up to 20 thousand days; however, the amount of the judicial fine cannot be less than three times the damage suffered by the crypto asset service provider and its customers. In addition, it will be decided that the damage incurred will be paid jointly. If, before the investigation begins, the embezzled money or documents or promissory notes, other goods or crypto assets are returned in their original condition or the damage suffered is fully compensated, the sentence will be reduced by two-thirds. If, before the prosecution begins, the embezzled money or documents or promissory notes, other goods or crypto assets are voluntarily returned in their original condition or the damage suffered is fully compensated, the sentence will be reduced by half. If this situation occurs before the verdict, the sentence will be reduced by one-third. The sentence to be imposed will be reduced from one-third to one-half due to the low value of the money or documents or promissory notes, other goods or crypto assets constituting the subject of the crime of embezzlement on the date of the crime. Personal Liability Regarding Crypto Assets In order to ensure that the chairman and members of the board of directors, other members, real person partners who have legally or de facto management or control of the crypto asset service provider, who are determined to have made decisions and transactions deemed as embezzlement, are primarily covered from the amount determined to have been embezzled, limited to the damage they have caused to customers, their personal liability may be taken and, upon the request of the Board, their personal bankruptcy may be decided directly by the court. If these decisions and transactions are made for the purpose of providing benefits to third parties, they will also be applied to the persons who provided benefits based on the benefits they provided. The assets of those for whom a personal bankruptcy decision is made, those that are in cash will be used directly, and those that are not, will be converted into money, to pay for the customers' damages. Customer damages will be paid first from the assets. If all customer damages cannot be covered, a cash payment will be made. After the customer damages are fully covered, the remaining portion will be returned to those for whom a personal bankruptcy decision is made. Special investigation procedure for the crime of embezzlement of crypto assets Investigations and prosecutions shall be conducted by the public prosecutors upon written notification of the Board or ex officio in cases where delay is deemed undesirable, and the Board shall be notified. In the event that a public lawsuit is filed upon application, a copy shall be notified to the Board together with the acceptance of the indictment and the Board shall also gain the status of "participating party". If it is decided that there is no need for prosecution, this decision shall be notified to the Board and the relevant parties to the investigation, depending on the relevance. The Board and the relevant parties shall be authorized to object to these decisions notified to them in accordance with the Code of Criminal Procedure. Cases related to the defined crime of embezzlement shall be heard in the No. 1 high criminal courts named after the province to which the act was committed is affiliated. In places deemed necessary, upon the proposal of the Ministry of Justice, the Board of Judges and Prosecutors may also assign other high criminal courts in those places to hear such crimes. Those convicted of these crimes will not be subject to conditional release provisions as long as they fail to pay their debts and compensations to the Treasury or as long as these debts and compensations cannot be collected from their assets. Each year, one percent of all revenues of the platforms, excluding interest revenues from the previous year, will be paid to the Capital Markets Board and one percent to the TUBITAK budget by the end of May of the relevant year to be used in the development of blockchain and related information technologies and recorded as revenue. Accordingly, other principles regarding the accruals and payments to be made will be determined by the CMB. Transitional provisions regarding crypto asset service providers Those who are engaged in crypto asset service provider activities on the date of entry into force of the Law will be required to submit a declaration stating that they will apply to the Board with the documents to be determined by the Board within one month from the effective date and that they will make the necessary applications to obtain an activity permit by meeting the conditions to be stipulated in the secondary regulations or that they will make a liquidation decision within three months without harming the rights and interests of the customers and that they will not accept new customers during the liquidation process. Those who want to start their activities after the Law comes into force will apply to the Board before starting their activities and declare that they will make the necessary applications to obtain an activity permit by meeting the conditions to be stipulated in the secondary regulations. Failure to fulfill the transfer requests of customers who have accounts in institutions that prefer to go into liquidation or do not apply to the Board within the specified period will constitute the crime of unauthorized service provider activity. Crypto asset service providers located ab