Proposal of the draft law on crypto assets (“Draft”) to the Grand National Assembly of Turkey is undoubtedly long-awaited in the crypto-asset industry. Although there are various speculations and expectations regarding the Draft, it is considered almost certain that the regulation and supervision of the crypto-asset industry will be left to the Capital Markets Board (“CMB”) and CMB will impose certain conditions on the crypto asset service providers before they can obtain a license to continue activities in Turkey. Thus subjecting individuals and institutions operating in the crypto-asset industry without obtaining a license from CMB to a number of penalties and administrative measures. In fact, it will also be a criminal offense to conduct activities without a pr license.
The crime of unauthorized capital market activity is regulated in the second paragraph of Article 109 of the Capital Markets Law No. 6362 (“CML”) and this provision has been actively enforced by the CMB for many years. According to the the specified provision:
“Those who perform unauthorized activities in the capital market shall be sentenced to imprisonment from two years up to five years and be punished with a judicial fine from five thousand days to ten thousand days. Those who commit this crime at the same time with the crime defined in the first paragraph, shall be fined only due to the crime defined in this paragraph and the fine shall be increased by half.”
If CMB detects unauthorized capital market activity, upon the filing of a criminal complaint to the relevant Public Prosecutor’s Office by the exclusive authority of the CMB as per Article 115 of the CML, investigation and prosecution processes will be carried out against those who provide services without complying with the relevant laws and regulations.
Another important consequence of this crime -for those who provide the capital market services as a profession without permission- is “confiscation of earnings”. Individuals and institutions that carry out capital market activities “as a profession”, without a proper license, will be subject to confiscation of all the proceeds they earned pursuant to Article 55 of the Turkish Penal Code No.5237, titled “Confiscation of Earnings”.
Therefore, activities such as operating as a crypto asset service provider, providing intermediary services for the sale and purchase of crypto assets, and/or providing crypto asset custody services in Turkey without the permission of the CMB will bring legal and criminal risks following the enactment of the Draft. Following the enactment of the Draft and the publication of secondary regulations, it will be vitally important to apply to the CMB for individuals and institutions who want to avoid the possible criminal prosecution and do not want to potentially lose the Turkish market, which is considered relatively large.
On the other hand, it would not be unusual to expect that companies carrying out their activities exclusively from abroad –and broadcasting into Turkey- via internet will be prohibited in Turkey if they do not obtain a permit from the CMB. Similar measures have been enforced by the CMB for many years -for instance, to institutions established abroad and providing leveraged transactions for Turkey-, and access to the internet services of these institutions is prohibited in Turkey as per the third paragraph of Article 99 of the CML. CMB may take into account various activities that can be considered as “providing services” to the users residing in Turkey such as having a Turkish language website and carrying out promotional, advertising, and marketing activities targeting users in Turkey.
Finally, we can expect the legislator to impose various measures targeting regular users who trade through unauthorized platforms since enforcing such a strictly designed operating permit for service providers can only be achieved by actually directing users to legitimate platforms that have properly received operating permits from the CMB.