Current Regulatory Framework for Cryptocurrencies/Tokens in Turkey
The world of cryptocurrency is wild. On the one hand, cryptocurrencies are extremely volatile. On the other, successful hacking attempts such as the DAO and the NEM hacks showed us that neither the schemes built around crypto-tokens nor the exchanges, where the key pairs granting access these cryptocurrencies/tokens are stored, are secure.
These risks and the uncertainty attracted the attention of regulatory authorities all around the world. There is no internationally recognized authority or instrument regulating cryptocurrencies or tokens. Hence national regulatory authorities are trying to address this problem all by themselves, at least for now.
This story will explore the current regulatory framework in Turkey. However before going further, it must be borne in mind that the use of the term ‘cryptocurrency’ is not an implication to legal status. Now we will proceed with our explanations.
Currently, there is no specific legislation regulating cryptocurrencies or tokens in Turkey.
There is a closed working group focusing on the classification of these crypto-assets and comprised of related regulatory authorities: The Central Bank of the Republic of Turkey (‘TCB’, ‘TMB’ in Turkish), Banking Supervision and Regulation Agency (‘BSRA’, ‘BDDK’ in Turkish) and Capital Market Boards of Turkey (‘CMB’, ‘SPK’ in Turkish). This working group is expected to present its report until the end of this year. But for now, the regulatory framework is mostly uncertain.
Regulatory authorities made some statements but they are mostly evasive and not deep in terms of analysis.
- Banking Supervision and Regulation Agency
In 2013, BSRA issued the following press release on Bitcoin.
As it can be seen from the statement, BSRA did not explore what Bitcoin is but stated that what it is not. Turkey has a specific electronic money legislation in place. This legislation was a part of the efforts to harmonize national legislation with the EU law and it is generally compliant with its EU counterpart. What BSRA stated here is that Bitcoin is not electronic money under that specific legislation (Law No: 6493) due to the fact that there is neither guarantees for its collateral nor a backing institution behind it.
One must be cautious while reading this release as it has been interpreted wrongly by some writers. This release does not state that Bitcoin is not money. Electronic money is not the same as money but just a digital presentation of it. Hence, the question whether Bitcoin is money is different from whether it is electronic money, and the former requires a more detailed legal/economic analysis which is beyond the scope of this story.
It must be noted that the expression ‘Bitcoin, known as virtual money’ is not an implication to status of Bitcoin as money but just a reference to common perception.
It must also be mentioned that BSRA does not refer to cryptocurrencies or tokens in general but only to Bitcoin. This is important since cryptocurrencies and tokens might different features that might affect their classification. Indeed major cryptocurrencies such as Ether, Ripple, NEM and ZCash differ from Bitcoin in terms of purpose and structure. Therefore, BSRA’s press release should be read as to cover only cryptocurrencies similar to Bitcoin.
2. Financial Crimes Investigation Board (‘FCIB’, ‘MASAK’ in Turkish)
FCIB operates under the Turkish Ministry of Treasury and Finance. It is not directly involved with the regulation of cryptocurrencies or tokens. However, due to the fact that the anonymity and mobility provided by these structures make them suitable for illegitimate practices such as anti-money laundering and terrorist financing, FCIB counted ‘transfer of funds from customer accounts to accounts of intermediaries trading Bitcoin for the purpose of purchasing Bitcoins’ among suspicious transactions in its sectoral guidance (in Turkish, last updated on 3 August 2016) of suspicious transactions for banks.
Banks are obliged to report suspicious transactions. However, the transactions explicitly mentioned in the guidance are not exhaustive and this brings the question whether banks are obliged to inform not only transactions involving Bitcoin but also other cryptocurrencies/tokens. This question has not been definitely answered so far.
3.Turkish Central Bank
TCB has not made any statements regarding Bitcoin or other cryptocurrencies so far. However, in November 2017 the Governor of TCB Murat Çetinkaya stated that TCM monitors Bitcoin very closely and they think it can contribute to the financial stability.
Additionally, as we have already mentioned, there is a working group focusing on the regulation of cryptocurrencies/tokens and operating under TCB. This is a closed-group comprised of members from other national regulatory authorities.
4. Capital Markets Board of Turkey
CMB has not made a direct statement on Bitcoin or other cryptocurrencies so far. However, in a decision dated 1 December 2017 and addressed to the Turkish Capital Markets Association, which is to be circulated to banks and intermediary institutions in the form of general letter, CMB has stated as follows:
We have received requests of opinion from different intermediary institutions regarding whether Bitcoin and similar currencies can be used in contracts for differences (CFD) and whether it is possible to provide customers with services on derivatives based on virtual currencies.
… considering that there is no regulation or definition regarding virtual currencies in Turkey and virtual currencies are not mentioned among the elements that can be used as a basis for derivatives, it has been decided that, at this stage, derivative and spot transactions based on virtual currencies must not be made with customers.
(The original version of the statement, in Turkish, can be accessed here)
This is, once again, a superficial statement but it is definitely more useful in terms of regulatory guidance. In light of this statement, it is reasonable to say that the legal status of cryptocurrencies and tokens are indeed uncertain. However, they cannot be used as a basis for derivative transactions.
It must be noted that, unlike the press release of BSRA, CMB refers not only to Bitcoin but Bitcoin and similar virtual currencies. In our opinion, Bitcoin is neither money nor currency at this point. So we believe that this reference to ‘virtual currencies’ is not an attempt of classification but, just like the statement in BSRA, a reference to the commonly used expression.
As it can be inferred from the explanations above, the regulatory framework regarding cryptocurrencies is extremely uncertain. This can be considered as a good thing since the lack of regulation creates an environment in which innovative applications can incubate. However, it has also a downside as it also prevents large scale investments with the fear of regulatory uncertainty.
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