Crypto Regulations in Turkey

Cryptocurrency firstly entered Turkey in 2009 and has caught the attention of many investors and entrepreneurs almost immediately. The rapid growth of the practice and exploration of the usage of Cryptocurrency in Turkey has been noticeable, especially since 2013 when certain Turkish regulation authorities and supervision agencies announced the recognition of it.

Source: Guden Av

The BDDK has provided an indication that Cryptocurrency does not fall within the scope of Law no. 6439 on Payment Securities Settlement Systems, Payment Services, and Electronic Money Institutions. There is currently no legislation that specifically refers to Cryptocurrency and therefore it is not entirely accurate to declare this type of business activity is lawful or unlawful in Turkey. Cryptocurrency is not recognized under Turkish law however they are utilized in Cryptocurrency Activities in practice.

Source: Guden Av

In Turkish law, cryptocurrencies were initially governed by the “The Regulation on Prohibiting Payments with Crypto-Assets” (“Regulation”) published in the Official Gazette on April 16, 2021. By this regulation, the Central Bank of the Republic of Turkey (“CBRT”) prohibits the use of crypto assets as a payment instrument in legal transactions. However, none of its articles relates to trade in crypto assets. In addition, the Regulation can be considered ground-breaking as it introduces a definition of “crypto assets” for the first time. Article 3 of the regulation states that “In the implementation of this Regulation, crypto assets are defined as assets created virtually using distributed ledger technology or a similar technology and distributed over digital networks, but are not considered as money, fiat money, electronic money, payment instruments, securities or other capital market instruments.” The Regulation prohibits the following:

• Use of crypto assets, directly or indirectly, in payments
• Providing services for the use of crypto assets, directly or indirectly, in payments
• Provision by payment and electronic money institutions of intermediary services to the platforms offering the trade, deposit, transfer, or issuing of services relating to crypto assets or fund transfers from these platforms
• Development by payment service providers of business models enabling the use of crypto assets, directly or indirectly, in the provision of payment services and electronic money issuance, and provision by payment service providers of any services related to the such business model

Source: GVW

Yes, cryptocurrencies are legal in Turkey. 

It is legitimate for retail investors to buy, sell and own crypto. Crypto assets can be purchased through exchanges, peer-to-peer, and via Bitcoin/crypto ATMs.

Source: Coinfirm

Turkey’s citizens are increasingly using cryptocurrencies. Nevertheless, there is currently no regulation on the taxation of cryptocurrencies or NFT transactions. Eren Can Ersoy and Ezgi Kartın of Kılınç Law & Consulting explained that if cryptocurrencies are characterized as “securities” or “commodities,” the tax treatment would be as follows:

Securities: For cryptocurrencies to qualify as securities, such as initial coin offerings, they must be treated as “financial assets.” In this case, gains made from the purchase and sale of cryptocurrencies and the commissions earned by cryptocurrency exchanges in 2021 that exceed 19,000 liras will generally be subject to income tax, but not subject to value-added tax (VAT).

Source: Cointelegraph

No specific tax regulations apply to the exchange of crypto assets. According to the Income Tax Law (Law No. 193), the income of individuals is subject to income tax. The following types of income are subject to income tax: commercial income; agricultural earnings; wages; self-employment earnings; real estate capital income; securities capital income; and other earnings and revenue. The gains derived from cryptocurrency do not fall into any of these categories. If crypto assets were to be qualified as a commodity in Turkey, the income derived from the exchange of crypto assets would be subject to income tax as commercial income (depending on the volume and continuity of the exchange). Also, in line with the Corporate Income Tax Law (Law No. 5520), any corporate income (eg, income derived from cryptocurrency) is subject to taxation. Although the Regulation on Cryptoassets provides a definition for crypto assets, there is still uncertainty as to whether crypto assets meet Turkish taxation requirements. Under the Value Added Tax Law (Law No. 3065) the exchange of crypto assets is likely to be exempt from the scope of the law because the exchange of crypto assets cannot be included in the type of transactions listed in article 1 of Law No. 3065. However, if an intermediary service is provided for the exchange of crypto assets, this business will be subject to Law No. 3065.

Source: SRP-Legal

As yet, banks in Turkey cannot execute cryptocurrency exchange transactions, as the Banking Regulation and Supervision Agency has not authorised them to conduct such transactions. However, some Turkish banks are already collaborating with certain virtual currency exchange platforms in Turkey. For example, some banks do not collect bank wire fees for transfers made through certain virtual currency exchange platforms. Some also provide support to integrate applications within their accounts to facilitate fiat-to-crypto and/or crypto-to-crypto transactions.

Source: Mondaq

In the spring of 2021, two Turkish cryptocurrency exchanges, Thodex followed by Vebitcoin, shut down, with thousands of investors falling victim to a $2 billion fraud.

On May 1, 2021, President Erdoğan issued a presidential decree that added cryptocurrency exchanges to a list of institutions that must operate under Anti-Money Laundering and Counter-Terrorist Financing regulations. The same month, MASAK published a guide for crypto asset service providers that aims to prevent money laundering and the financing of terrorism through crypto asset transactions by obligating cryptocurrency exchanges to: 1) identify customers; 2) report suspicious transactions; 3) provide information and documents; 4) consistently provide information; and 5) retain documents. MASAK also ramped up its investigations of cryptocurrency-related operations in Turkey.

Source: Cointelegraph

In Turkey, there are no laws, legal regulations, or official/administrative authority decisions on blockchain technology. However, the authorities have adopted a positive attitude towards the use of this technology. For example, the 11th Development Plan issued by the Presidency of Strategy and Budget of the Republic of Turkey for 2019–2023, published on 9 July 2019, mentions several strategies focused on the use of blockchain technology. Also, on 18 September 2019, the Ministry of Industry and Technology announced its 2023 Industry and Technology Strategy. In this document, the following strategies are mentioned:

• The development of national blockchain infrastructure will be promoted, to create a network based on this emerging technology;
• In order to improve applications of blockchain technology, the first public-based applications that can be carried out using blockchain infrastructure (eg, land registration, diplomas, and customs applications) will be identified and applications will be designed on open source platforms;
• An environment will be created to pilot blockchain infrastructure developed, test out new, secure business models and processes (eg, supply chain, banking, and litigation applications); and
• A ‘regulatory sandbox’ will be created with the regulatory authorities to carry out compliance tests of blockchain applications and support investment by facilitating the certification of enterprises that successfully complete the tests.

A blockchain research laboratory, BCLabs, has also been established under the Department of Mathematical and Computational Sciences of the Scientific and Technological Research Council of Turkey Informatics and Information Security Research Centre, to conduct research and development on:

• the infrastructure, installation, and security of blockchain technology;
• privacy analysis;
• business models;
• crowdfunding approaches (eg, ICOs); and
• various technical details.

Source: Mondaq

ISTANBUL (AP) — Turkish police have detained 62 people as part of an investigation into a cryptocurrency exchange that is being accused of defrauding investors, according to the country’s state-run news agency.

Anadolu news agency said Friday prosecutors issued detention warrants for 16 more people linked to the Thodex cryptocurrency exchange and said the detentions took place in eight provinces.

On Thursday, Istanbul’s chief prosecutor’s office announced it was probing Thodex following complaints from users who could not access their assets. It is thought to have affected some 391,000 investors and an estimated $2 billion in investments.

Source: Apnews

On 1 May 2021, the Financial Crimes Investigation Board of Turkey (FCIB) amended the Regulation on Measures to Prevent Money Laundering and Financing of Terrorism (‘AML Regulation’).

As a result of the amendment, cryptocurrency service providers became responsible for compliance with the AML Regulation. In this regard, they must follow KYC procedures and verify the identities of their users before any transaction is executed; and they are now subject to the supervision of the FCIB with respect to their obligations under the AML Regulation. Other obliged parties which must comply with the AML Regulation include banks, financial leasing, factoring companies, brokerage firms, and portfolio management companies.

According to the FCIB’s Guide to Crypto Asset Service Providers, published on 5 May 2021, ‘crypto-asset service providers’ are institutions that mediate the trading of crypto assets. Therefore, the term ‘crypto asset service providers’ refers to crypto exchange platforms.

Generally, the FCIB is authorized to establish and develop methods and policies for anti-money laundering and counter-terrorist financing (AML/CFT) by:

• collecting and analyzing data;
• conducting research and investigations; and
• sharing information and results with the relevant authorities.

The FCIB is also a member of the Financial Action Task Force and accordingly is expected to follow its regulations and principles

Currently, crypto asset service providers need not be registered or licensed by a regulatory authority. However, it is likely that licensing and registration requirements will be imposed on crypto asset exchanges under the unofficially leaked Crypto Assets Legislative Draft, which aims to regulate crypto assets and markets.

Source: Mondaq

Yesterday the Turkish digital strategy for 2023 was released, outlining how the country will develop its technological capabilities. It revealed that Turkey plans for a ‘National Blockchain Infrastructure” among cloud computing, Internet of Things (IoT), and open source initiatives.

The government will build this infrastructure to encourage innovation and implement blockchain in the public sector. The initiative includes a testing environment for pilots and a regulatory sandbox to allow projects to grow.

The regulatory compliance of enterprise initiatives could further be tested in the government’s sandbox. Indeed, “[b]lockchain initiatives find application areas in regulated sectors,” so Turkey does not want to hinder their progress. This way, businesses can earn certification for blockchain projects in an open environment.

Turkey’s strategy came out on the same day as Germany’s extensive plans for blockchain regulation and use in government. While Turkey has a section on the technology among other digital initiatives, the German document is entirely dedicated to blockchain.

Source: Ledger Insights