Law on the Amendment of the Capital Markets Law Containing Regulations on Crypto Assets

Law No. 7518 on Amendments to the Capital Markets Law, which entered into force after being published in the Official Gazette on 02 July 2024, introduces a comprehensive regulatory framework for crypto assets in Türkiye. This review aims to provide a detailed analysis of the key provisions of the law, drawing comparisons with regulatory approaches adopted in other countries.

The main outlines of the law are as follows:

• Definition of Crypto Assets: The law defines crypto assets as intangible assets that are created using distributed ledger technology or similar technology, can be distributed over digital networks, and have the ability to express value or rights. This definition encompasses a broad range of cryptocurrencies, tokens, and other digital assets.

• Licensing Requirements: Platforms and intermediaries providing crypto asset services will be required to obtain a license from the Capital Markets Board (SPK) (Article 3). Existing platforms must submit their applications to the Board within one month. Otherwise, they must start the liquidation process within three months (Provisional Article 11). This licensing requirement aims to ensure that only qualified and reputable entities operate in the crypto asset space, promoting investor protection and market integrity.

• Structure of Crypto Asset Companies: The minimum paid-up capital amounts of crypto asset service providers will be determined by the Board (SPK). Existing providers will be given a grace period to meet these capital requirements. Additionally, service providers will be subject to regulations regarding organization, capital adequacy, information systems, and technological infrastructure (Article 3). These requirements are designed to ensure the financial stability and operational soundness of crypto asset companies.

• Crypto Asset Trading: Crypto asset platforms will be authorized to list assets that meet certain criteria and offer trading opportunities to investors (Article 4). This provision aims to facilitate transparent and orderly trading of crypto assets while ensuring that only qualified assets are made available to investors.

• Market Surveillance: The Board (SPK) will be responsible for monitoring crypto asset markets and taking necessary measures to maintain market integrity and protect investors (Article 9). This includes enforcing regulations, addressing market manipulation, and investigating potential fraud or misconduct.

• Advertising of Crypto Assets: Advertisements related to crypto assets must comply with the guidelines set by the SPK (Article 4). This aims to prevent misleading or deceptive marketing practices that could harm investors.

• Taxation of Crypto Assets: Earnings obtained from crypto assets, defined as "intangible assets," will be subject to taxation. However, the specific tax treatment of crypto assets is yet to be determined in a separate regulation (Article 11). This uncertainty creates challenges for both investors and crypto asset businesses.

Comparative Analysis with Other Jurisdictions

European Union (MiCA Regulation)

The European Union's Markets in Crypto Assets Regulation (MiCA), adopted on May 16, 2023, establishes a harmonized legal framework for crypto assets across the EU. MiCA focuses on financial stability, investor protection, and preventing money laundering and terrorist financing.

Financial Stability Board (FSB)

In its October 2022 report, the FSB issued nine recommendations on the regulation of crypto asset activities and markets. These recommendations cover areas such as regulatory authorities, a general regulatory framework, cross-border cooperation, and data collection. The law enacted in Türkiye incorporates some of these recommendations.

Comparison Table: Türkiye & Other countries

Country/Region	Regulatory Framework	Licensing Requirements	Taxation
Türkiye	Definition of crypto assets under SPK, broad powers of SPK	Obligation to obtain a license from the Board, licensing and regulation of platforms	Gains from crypto assets will be taxed as intangible assets
European Union (MiCA)	Harmonized legal framework throughout the EU, financial stability and investor protection	Licensing and regulation of crypto asset service providers	Crypto asset gains are taxed with automatic exchange of information between member states
United States	No comprehensive framework at the federal level yet, varies by state	State-based licensing, BitLicense application in some states	Crypto asset gains are taxed as capital gains
Japan	Crypto assets are regulated as financial instruments	Licensing of crypto asset service providers by the FSA	Crypto asset gains are taxed as general income
Australia	Crypto assets are considered intangible assets	Mandatory registration of crypto asset service providers with AUSTRAC	Crypto asset gains are taxed as capital gains

Advantages and Disadvantages of the New Regulation

PROS (+)	CONS (-)
The law is an important step in terms of drawing the general framework of crypto assets, which are seen as an attractive investment instrument in Türkiye but are not trusted.	The Law is focusing more on the structure of Crypto Asset Service Providers and creating uncertainty by leaving very basic regulations such as taxation for later.
The Law aims to ensure that those who provide services in this field have a solid structure by imposing conditions on determining their fields of activity, capital and partnership structure, as well as the condition of obtaining a licence for Crypto Asset Service Providers.	Regulations on licensing and capital/partnership structure do not mean that the transactions of Crypto Asset Service Providers, which are not subject to the investor compensation provisions of the SPK, are under public guarantee. Parallel to MiCA, there is no reserve fund arrangement in the law to protect investors in cases such as bankruptcy.
Measures have been taken to protect the investor, such as not mixing the assets of Crypto Asset Service Providers and the assets of the customers, not being able to go to the investments of the customers due to the debts of the Service Providers, special procedures and severe penalties for the follow-up of the customer's assets in case of embezzlement.	Criticisms are made that these measures are related to the period after the risk is realised, i.e. after situations such as embezzlement occur. However, before the risk is realised, i.e. before the investor's assets are damaged, a structure such as a reserve fund, as mentioned above, should be established to act as a kind of insurance in case of the risk.

Assessment and Conclusion

The Law on crypto assets represents a significant step towards regulating the crypto ecosystem in Türkiye. It introduces a comprehensive framework that addresses key aspects such as licensing, market surveillance, and investor protection. However, the lack of clarity regarding the taxation of crypto assets creates uncertainty for market participants.

The Law places a strong emphasis on the structure and licensing of crypto asset service providers, aiming to ensure the soundness and integrity of these entities. While these measures are important, they may not be sufficient to fully protect investors from potential risks associated with crypto assets.

The establishment of a reserve fund or similar mechanism to safeguard investor assets in case of insolvency or other unforeseen events could further strengthen the regulatory framework. Additionally, providing clear and comprehensive tax guidance on crypto assets would enhance legal certainty and encourage participation in the crypto market.

Autor: Emre Kurt