{"id":1778,"date":"2024-06-06T10:41:25","date_gmt":"2024-06-06T07:41:25","guid":{"rendered":"https:\/\/www.gulmalkoc.com\/en\/?p=1778"},"modified":"2024-06-06T10:41:25","modified_gmt":"2024-06-06T07:41:25","slug":"reviews-on-the-crypto-assets-draft-law","status":"publish","type":"post","link":"https:\/\/www.gulmalkoc.com\/en\/banking-and-finance\/reviews-on-the-crypto-assets-draft-law\/","title":{"rendered":"Reviews on the Crypto Assets Draft Law"},"content":{"rendered":"<p><strong>A. Introduction<\/strong><\/p>\n<p>Nowadays, rapidly changing technologies have also affected financial markets, leading to significant changes in centralized systems. Distributed ledger technology (DLT) enables transactions to be recorded and synchronized by all parties instead of being carried out centrally. Crypto-assets created based on this technology differ from assets in the traditional financial system in that they do not need central authority in asset transfer and similar transactions with innovations such as block-chain and encryption.<\/p>\n<p>As a result of these technological developments and also as an accelerator of technological developments, the cryptocurrency market has developed rapidly in the recent period, attracted the attention of global regulatory authorities and studies have been initiated for legal regulations in this field. In Turkey, important steps have been taken in this regard and the Proposal for the Amendment of the Capital Markets Law No. 6362, commonly known as the Crypto Asset Draft Law (the \u201c<strong>Draft Law<\/strong>\u201d) was submitted to the Grand National Assembly of Turkey on 16.05.2024. In this article, we aim to elaborate on the content, objectives and possible impacts of this proposal.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>B. Scope and Objectives of the Draft Law<\/strong><\/p>\n<p>The Draft Law aims to regulate and supervise the issuance, distribution, settlement, custody, portfolio management and similar activities of crypto assets in Turkey. The Draft Law includes provisions on the activities, authorization, responsibilities and investor protection of crypto asset service providers (\u201cService Providers\u201d).<\/p>\n<p>Among the main objectives of the Draft Law, it would be appropriate to list the following:<\/p>\n<ul>\n<li>To ensure the healthy and secure development of the crypto asset ecosystem,<\/li>\n<li>To prevent negative events such as fraud and manipulation in the crypto asset market, to protect investors and to increase transparency in the market,<\/li>\n<li>contribute to the prevention of money laundering, terrorist financing and other crimes; and<\/li>\n<li>To promote the development of the crypto asset sector in Turkey and attract investors.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><strong>C. Examination of the Articles<\/strong><\/p>\n<p><strong>1.In General<\/strong><\/p>\n<p style=\"font-weight: 400;\">The Draft Law regulates the following issues:<\/p>\n<ul>\n<li>Regulation of Service Provider activities.<\/li>\n<li>Regulation of the activities of crypto asset platforms.<\/li>\n<li>Regulations regarding the custody of crypto assets.<\/li>\n<li>Regulation of the purchase, sale and transfer transactions of crypto-assets that may be carried out by Turkish residents on crypto-asset platforms.<\/li>\n<li>Requirement to obtain permission from the Capital Markets Board (\u201cCMB\u201d) for the establishment and operation of Service Providers.<\/li>\n<li>Determination of the principles and principles that Service Providers must comply with during their activities by secondary regulations to be issued by the CMB pursuant to the articles to be added to the Capital Markets Law.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><strong>2. Article 1 (Definitions and Scope)<\/strong><\/p>\n<p style=\"font-weight: 400;\">This article defines the basic concepts used in the Draft Law. Clear and precise definitions of terms such as wallet, cryptoasset, cryptoasset service provider, cryptoasset custody service, platform will increase the understandability of the legislation. In addition, a clear definition of the scope of the law will prevent uncertainties that may be encountered in practice.<\/p>\n<p style=\"font-weight: 400;\">Within the scope of the Draft Law, cryptoassets are defined broadly and in line with international regulations as \u201cintangible assets that can be created and stored electronically using distributed ledger technology or a similar technology, distributed over digital networks and can express value or rights\u201d.<\/p>\n<p style=\"font-weight: 400;\">The General Justification of the Draft Law also defines these crypto assets as securities crypto assets (more commonly known as security tokens), electronic money crypto assets (more commonly known as e-money tokens), utility crypto assets (more commonly known as utility tokens) and crypto-assets (more commonly known as non-fungible tokens), which constitute a proof of ownership similar to copyright with respect to photographs, videos, audio, artworks and other similar items, and furthermore, crypto-assets may be classified as stable and unstable depending on whether there is an asset behind the value of the crypto-asset.<\/p>\n<p style=\"font-weight: 400;\">Wallet is defined as software, hardware, systems or applications that enable the transfer of crypto assets and the storage of these assets or their private\/public keys online (hot wallet) or offline (cold wallet). The definition has been broadened to include new wallet types that may emerge in the future.<\/p>\n<p style=\"font-weight: 400;\">Crypto Asset Service Providers (Service Provider): The definition of Service Providers in the Draft Law is broader compared to the previous regulations. Service Providers include not only platforms that intermediate the purchase and sale of crypto assets, but also organizations that provide crypto asset custody services and other organizations that provide services related to crypto assets.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>3. Article 2<\/strong><\/p>\n<p style=\"font-weight: 400;\">Within the scope of this article, the Draft Law opens the door to the issuance of capital market instruments as crypto assets. In the event that capital market instruments are issued as crypto-assets, it is stated that the CMB may determine the principles regarding the electronic recording of these instruments instead of their monitoring by the Central Registry Agency (CRA). Capital market instruments issued as crypto-assets will be recorded in electronic media for monitoring their rights, asserting them against third parties and transferring them.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>4. Article 3 (Authorization\/Licensing and Supervision)<\/strong><\/p>\n<p style=\"font-weight: 400;\">It is mandatory for Service Providers to obtain permission from the CMB for their establishment and activities and to operate in accordance with the principles set forth. Pursuant to Article 3 of the Draft Law, the establishment, commencement of operations, shareholders, managers, personnel, capital, capital adequacy, information systems and technological infrastructure, share transfers, activities and all other principles and principles that Service Providers must comply with are placed under the supervision and oversight authority of the CMB.<\/p>\n<p style=\"font-weight: 400;\">Service Providers are obliged to make the necessary arrangements, take measures and establish internal control units for the secure management of their systems. In order to start operations, i.e. to obtain permission from the CMB, their information systems and technological infrastructure must comply with the criteria to be determined by T\u00dcB\u0130TAK.<\/p>\n<p style=\"font-weight: 400;\">Limitations are also imposed on the real and legal persons who may hold shares in Service Providers. In this context, the shareholders of Service Providers must not be bankrupt, not have been convicted of certain crimes, have financial strength and integrity, and have a transparent shareholding structure. Members of the board of directors and persons authorized to represent them must also meet similar requirements. Legal entity shareholders holding ten percent or more shares must meet these requirements. If these qualifications are lost, the relevant shares must be transferred to the appropriate persons within six months. These requirements are intended to guarantee the reliability and financial soundness of the partners.<\/p>\n<p style=\"font-weight: 400;\">The CMB will also regulate the procedures and principles regarding the trading and sale of crypto-assets through platforms and the initial sale or distribution of crypto-assets, as well as the clearing, transfer and custody of crypto-assets.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>5. Article 4\/Article-5 (Service Principles)<\/strong><\/p>\n<p style=\"font-weight: 400;\">Within the scope of the Draft Law, the principles regarding the activities of Service Providers and the transfer and custody of crypto-assets can be summarized as follows<\/p>\n<p><strong>5.1. Contracts: <\/strong>Contracts between Service Providers and clients may be made in writing or through remote communication tools. The CMB determines issues such as the arrangement, scope, amendment, fees and expenses of contracts. Contractual terms that remove or limit the liability of clients are invalid. The obligation to identify the identity of clients in accordance with the Law No. 5549 on Prevention of Laundering Proceeds of Crime and related legislation has been maintained.<\/p>\n<p><strong>5.2. Listing Procedure: <\/strong>Platforms are obliged to establish a written listing procedure to identify the crypto assets that they will use in their own transactions or for initial sale or distribution and to finalize transactions. This procedure may be organized according to the principles set by the CMB. The opinions of organizations such as T\u00dcB\u0130TAK may be taken into account in determining technical criteria.<\/p>\n<p><strong>5.3. Market Regulations: <\/strong>Prices are freely formed on platforms. Platforms take the necessary measures to ensure that transactions take place in a safe, transparent and competitive manner and prevent market distorting transactions. They are also obliged to detect and report market disruptive actions to the CMB.<\/p>\n<p><strong>5.4. Disputes: <\/strong>Disputes between platforms and clients are subject to general provisions. Crypto assets are not subject to investor indemnification provisions.<\/p>\n<p><strong>5.5. Registration and Security: <\/strong>Records related to crypto asset and fund transfers are kept in a secure, accessible and traceable manner. Integrity, accuracy and confidentiality of transaction records are ensured. Relevant regulations are complied with in transfer transactions.<\/p>\n<p><strong>5.6. Custody Services: <\/strong>It is essential that customers&#8217; crypto assets are kept in their own wallets; otherwise, custody services must be provided by authorized banks or institutions authorized by the CMB. Cash assets belonging to clients are kept in banks.<\/p>\n<p><strong>5.7. Protection of Client Assets: <\/strong>Cash and crypto assets belonging to customers are kept separately from the assets of the Service Providers and these assets cannot be seized, pledged, included in the bankruptcy estate or subject to injunction due to the debts of the Service Providers. Client cash held in banks shall be monitored in individual accounts separately from the investment institution&#8217;s own cash assets. Client accounts cannot be used as credit collateral for the debts of the investment institution and restrictions such as blockage and pledge cannot be placed on these accounts in favor of the investment institution.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>6. Article 6 (Obligation to be a Member of the Turkish Capital Markets Association)<\/strong><\/p>\n<p style=\"font-weight: 400;\">With the amendment to the Capital Markets Law, crowdfunding platforms and service providers are obliged to become a member of the Capital Markets Association of Turkey (\u201cCMA\u201d). These institutions that obtain an authorization certificate are required to apply to the CMA within three months, and their activities may be suspended by the CMB if they fail to comply with this obligation.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>7. Article 8 (Measures)<\/strong><\/p>\n<p style=\"font-weight: 400;\">This Article regulates the measures that may be taken by the CMB regarding the activities of crypto asset service providers as follows<\/p>\n<p><strong>7.1.<\/strong> <strong>Implementation of measures for unauthorized crypto asset service provider activities:<\/strong><\/p>\n<ul>\n<li>The provisions of Articles 96, 99 and 100 of the Capital Markets Law shall apply.<\/li>\n<li>The activities of platforms based abroad towards Turkish residents are also considered as unauthorized cryptoasset service provision.<\/li>\n<\/ul>\n<p><strong>7.2.<\/strong> <strong>Measures to be taken by the CMB in case of weakening of the financial structure of Service Providers:<\/strong><\/p>\n<ul>\n<li>Request to strengthen their financial structure for a period not exceeding three months,<\/li>\n<li>Temporarily suspending its activities without giving a deadline,<\/li>\n<li>Removing operating authorizations, and<\/li>\n<li>Limiting or removing signature authorizations of responsible managers and employees.<\/li>\n<\/ul>\n<p><strong>7.3.<\/strong> <strong>Measures to be taken by the CMB regarding publications on the internet:<\/strong><\/p>\n<ul>\n<li>Removing the content or blocking access to announcements, advertisements and announcements that are contrary to the principles determined by the CMB,<\/li>\n<li>Removing or blocking access to content related to cryptoasset investment advisory and portfolio management activities contrary to the principles determined by the CMB, and<\/li>\n<li>Removing the content or blocking access in case it is detected that unauthorized Service Provider activities are carried out through the internet.<\/li>\n<\/ul>\n<p><strong>7.4. Measures to be taken by the CMB regarding announcements, advertisements and announcements made on media other than the internet:<\/strong><\/p>\n<ul>\n<li>Suspension of the announcements and advertisements of those responsible, and<\/li>\n<\/ul>\n<p>Collecting unlawful documents, announcements and advertisements.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>8. Article 9 (Audit and Responsibility)<\/strong><\/p>\n<p style=\"font-weight: 400;\">This clause contains the audit, responsibilities and other related provisions of the Service Providers:<\/p>\n<p><strong>8.1. Audit:<\/strong><\/p>\n<ul>\n<li>The audit of Service Providers shall be conducted in accordance with Articles 88, 89 and 90 of the Capital Markets Law.<\/li>\n<li>In addition to CMB personnel, personnel from other public institutions may be assigned for the audit.<\/li>\n<li>The financial audit and information systems audit of the Service Providers shall be conducted by independent audit institutions announced by the CMB.<\/li>\n<\/ul>\n<p><strong>8.2. Responsibilities:<\/strong><\/p>\n<ul>\n<li>Service Providers are liable for damages arising from their unlawful activities and failure to fulfill their cash\/crypto asset payment obligations.<\/li>\n<li>In case the damages cannot be collected from the Service Providers, the responsible managers and employees may also be liable according to their fault.<\/li>\n<li>Service Providers are also liable for losses of crypto assets caused by IT systems and personnel.<\/li>\n<\/ul>\n<p><strong>8.3. Other Provisions:<\/strong><\/p>\n<ul>\n<li>All kinds of administrative and judicial requests such as injunctions, attachments and similar administrative and judicial requests regarding the cash and crypto assets belonging to the customers shall be fulfilled by the Service Providers.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><strong>9. Article 12\/Article 13 (Sanctions and Penal Regulations)<\/strong><\/p>\n<p style=\"font-weight: 400;\">This article introduces important provisions to the Capital Markets Law in terms of supervision of the activities of Service Providers, their responsibilities and criminal sanctions:<\/p>\n<p><strong>9.1. Unauthorized Crypto Asset Service Provider Activity:<\/strong><\/p>\n<ul>\n<li>Real persons and legal entities that operate as crypto asset service providers without authorization are subject to imprisonment and judicial fines.<\/li>\n<\/ul>\n<p><strong>9.2. Embezzlement Offense in Service Providers:<\/strong><\/p>\n<ul>\n<li>Heavy penalties are envisaged for executives and employees of Service Providers who embezzle assets entrusted to them.<\/li>\n<li>The use of assets by the managers of Service Providers, whose operating license has been revoked, for their own benefit or for the benefit of others is also considered within the scope of the offense of embezzlement.<\/li>\n<li>A reduction in the penalty is envisaged if the embezzled assets are returned or the damage is compensated before the offense is committed or before the prosecution begins.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><strong>10. Article 15 (Special Investigation Procedure)<\/strong><\/p>\n<p style=\"font-weight: 400;\">This Article sets forth the special investigation and prosecution procedures for embezzlement offenses committed by Service Providers:<\/p>\n<p><strong>10.1. Investigation and Prosecution Procedure:<\/strong><\/p>\n<ul>\n<li>Investigations and prosecutions shall be conducted by the Public Prosecutors upon the written notification of the CMB or ex officio in cases where delay is inconvenient.<\/li>\n<li>In the event of a public lawsuit, the CMB shall be deemed as a participant.<\/li>\n<li>Decisions on non-prosecution shall be notified to the CMB and the relevant parties. CMB and those concerned may object to these decisions.<\/li>\n<\/ul>\n<p><strong>10.2. Competent Court:<\/strong><\/p>\n<ul>\n<li>Cases related to these offenses shall be tried at the Assize Court No. 1 of the province where the act is committed.<\/li>\n<li>Where deemed necessary, other Assize Courts may be assigned by the Council of Judges and Prosecutors upon the proposal of the Ministry of Justice.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><strong>11. Article 17 (Transitional Provisions)<\/strong><\/p>\n<p style=\"font-weight: 400;\">This provisional article regulates the transition period regarding the current status of Service Providers and new activities:<\/p>\n<p><strong>11.1. Status of Existing Service Providers:<\/strong><\/p>\n<ul>\n<li>Those operating as Service Providers on the effective date shall apply to the CMB within 1 month with the documents to be provided by the CMB and declare that they will make the necessary applications to obtain an operating license by fulfilling the conditions stipulated under the secondary legislation to be issued, or that they will decide to liquidate within 3 months and will not accept new customers while protecting customer rights.<\/li>\n<li>Those who fail to fulfill their obligations may be subject to criminal sanctions related to the offense of unauthorized service provision.<\/li>\n<li>After the publication of the secondary regulations, the relevant Service Providers will apply to the CMB for authorization to operate within the prescribed periods.<\/li>\n<li>Institutions that fail to obtain an authorization certificate within this period may be asked to terminate their activities.<\/li>\n<li>Failure to fulfill the transfer requests of customers by institutions that have decided to liquidate will constitute the crime of unauthorized service provision.<\/li>\n<\/ul>\n<p><strong>11.2. Status of New Service Providers to Start Operations After the Enforcement:<\/strong><\/p>\n<ul>\n<li>Service Providers wishing to start operating after the effective date will apply to the CMB with the documents to be provided by the CMB and submit a declaration that they will make the necessary applications to obtain an operating license by meeting the conditions stipulated under the secondary legislation to be issued.<\/li>\n<li>After the publication of the secondary regulations, the relevant Service Providers will apply to the CMB for an operating license within the prescribed periods.<\/li>\n<li>After the publication of the secondary regulations, the CMB may determine an additional period of time to complete the authorization procedures of the existing Service Providers.<\/li>\n<li>Institutions that fail to obtain an authorization certificate within this period may be asked to terminate their activities.<\/li>\n<\/ul>\n<p><strong>11.3. Status of New Service Providers to Start Operations After the Issuance of Secondary Regulations:<\/strong><\/p>\n<ul>\n<li>Service Providers that will start operating after the publication of the secondary regulations will apply to the CMB within the scope of the secondary regulations and obtain an authorization to operate.<\/li>\n<\/ul>\n<p><strong>11.4. Status of Foreign Providers:<\/strong><\/p>\n<ul>\n<li>Service Providers located abroad are obliged to terminate their activities for residents in Turkey within 3 months.<\/li>\n<\/ul>\n<p><strong>11.5. Status of ATMs and Similar Devices:<\/strong><\/p>\n<ul>\n<li>The activities of ATMs and similar devices that allow crypto asset transactions will be terminated within 3 months.<\/li>\n<li>ATMs that do not terminate their activities will be closed upon notification of the local administrative supervisor.<\/li>\n<\/ul>\n<p><strong>11.6. Other Provisions:<\/strong><\/p>\n<ul>\n<li>Secondary regulations will be put into effect within 6 months following the entry into force of this article.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><strong>D. Conclusion<\/strong><\/p>\n<p style=\"font-weight: 400;\">The Draft Law is a comprehensive regulation that promotes the healthy and secure development of the cryptoasset market in Turkey. The Draft Law aims to protect investors and increase market transparency by requiring Service Providers to obtain authorization from the CMB and operate under strict supervision.<\/p>\n<p style=\"font-weight: 400;\">Supervision over the financial competence, information systems and personnel structures of Service Providers will increase security in the sector. Moreover, restrictions on the activities of foreign platforms in Turkey will help regulate the local market.<\/p>\n<p style=\"font-weight: 400;\">In conclusion, the Draft Law is an important step to regulate and develop Turkey&#8217;s cryptoasset market and provides a forward-looking regulatory framework for all stakeholders operating in this space.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>As a result of technological developments, studies have been initiated in Turkey for legal regulations regarding the cryptocurrency market. In this article, we aim to discuss the content, objectives and possible effects of these regulations in detail.<\/p>\n","protected":false},"author":5,"featured_media":1779,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[25,31,32,34,26,35,33],"tags":[76,77,79,78,67,80,81,82],"class_list":["post-1778","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-banking-and-finance","category-capital-market-law","category-contract-law","category-corporate-law-and-compliance","category-intellectual-property-and-technology-law","category-litigation-and-legal-procedures","category-start-up-vc","tag-bitcoin","tag-blockchain","tag-crypto-asset-law","tag-crypto-money","tag-it-law","tag-nft","tag-technology-law","tag-token"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.gulmalkoc.com\/en\/wp-json\/wp\/v2\/posts\/1778","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.gulmalkoc.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.gulmalkoc.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.gulmalkoc.com\/en\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/www.gulmalkoc.com\/en\/wp-json\/wp\/v2\/comments?post=1778"}],"version-history":[{"count":3,"href":"https:\/\/www.gulmalkoc.com\/en\/wp-json\/wp\/v2\/posts\/1778\/revisions"}],"predecessor-version":[{"id":1782,"href":"https:\/\/www.gulmalkoc.com\/en\/wp-json\/wp\/v2\/posts\/1778\/revisions\/1782"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.gulmalkoc.com\/en\/wp-json\/wp\/v2\/media\/1779"}],"wp:attachment":[{"href":"https:\/\/www.gulmalkoc.com\/en\/wp-json\/wp\/v2\/media?parent=1778"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.gulmalkoc.com\/en\/wp-json\/wp\/v2\/categories?post=1778"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.gulmalkoc.com\/en\/wp-json\/wp\/v2\/tags?post=1778"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}