Crypto Asset Regulations Have Been Submitted to the Turkish Parliament

Certain important regulations in the Bill are summarized below and we would like to remind you that there may be differences between the regulations in the Bill and the regulations that will enter into force.

The definition of crypto assets will be included in the Capital Markets Law numbered 6362 (“Law”)

• Definitions of wallet, crypto asset, Platform, crypto asset service provider, and crypto asset custody service will be added to the Law. Within this regard, crypto assets will be defined as intangible assets that can be created and stored electronically using distributed ledger technology or similar technology, that are distributed through digital networks, and that can represent value or rights. Crypto asset service providers will be defined to refer to Platforms, organizations that provide crypto asset custody services, and other organizations designated to provide services related to crypto assets, including the initial sale or distribution of crypto assets, in regulations to be made based on the Law. Also, Platforms will be defined to refer to organizations that carry out one or more of the following crypto asset related activities: trade, initial sale or distribution, clearing, settlement, transfer, custody (as required within the scope of aforementioned activities), and other activities to be determined.

Crypto asset service providers, including Platforms, will be required to obtain establishment and operating permits

• In order for the Platforms to be established and put into operation, permission will be required from the Capital Markets Board (“CMB”). Crypto asset service providers operating on the date when the regulations in the Bill come into force will be required to apply to the CMB within one month from the effective date and to submit a declaration stating that they will make the necessary applications to obtain an operating permit by meeting the conditions stipulated in the secondary regulations, or that they will take a liquidation decision within three months without damaging customer rights and interests, and that they will not accept new customers during the liquidation process.
• Those who wish to start operating after the effective date of the regulations in the Bill will be required to apply to the CMB before commencing their operations and declare that they will make the necessary applications to obtain an operating permit by meeting the conditions stipulated in the secondary regulations.
• It will be required to obtain the permission of the CMB for share transfers of crypto asset service providers.

Activities carried out by Platforms resident abroad for Turkish residents will be considered as unauthorized provision of crypto asset services

• In the event that the Platforms resident abroad open a place of business in Turkey, establish a website in Turkish, or engage in promotional and marketing activities directly and/or through persons or institutions resident in Turkey in relation to the crypto asset services offered, those activities will be deemed to be directed to Turkish residents. Platforms resident abroad will be required to terminate their activities for Turkish residents within 3 months following the effective date of the amendments.

Platforms will be required to create a written listing procedure for determining the crypto assets to be sold or distributed for the first time and for terminating their trade

• It will be mandatory for the Platforms to establish a written listing procedure for determining the crypto assets to be traded on their platform and/or to be sold or distributed for the first time, and for terminating their trade. CMB will be authorized to determine the principles to be applied in this regard. However, the fact that a crypto asset is listed by the Platforms will not mean that they will be backed by the authorities.

Crypto assets will be custodied by authorized banks or institutions for those who prefer not to keep their crypto assets in their own wallets

• Although it will be essential for the crypto assets belonging to the customers of the Platforms to be kept in the customers' own wallets, the custody service for the crypto assets that the customers do not prefer to keep in their own wallets will be provided by banks which will be authorized in accordance with the regulation to be made by the CMB and will be deemed appropriate by the Banking Regulation and Supervision Board, or other institutions authorized by the CMB to provide crypto asset custody services.
• In addition, it will be essential to keep customers' cash in banks.

Monitoring of the dematerialized capital market instruments through electronic platforms offered by crypto asset service providers will be allowed

• CMB will determine principles regarding the issuance of capital market instruments as crypto assets and monitoring of crypto assets in dematerialized form on the electronic platform provided by the service providers where they are created and stored. In case of the issuance of capital market instruments as crypto assets, the records of the electronic platforms in which crypto assets are created and stored will be taken as basis in monitoring the rights, asserting them against third parties and transferring them. The CMB will be authorized to require integration between these electronic platforms’ and the Central Securities Depository system.

Liability of crypto asset service providers and their members will be regulated

• In cases where it is determined that crypto asset service providers cannot fulfill their cash payment and crypto asset delivery obligations arising from their activities, or that they cannot fulfill their aforementioned obligations in a short time, or that their financial structure is seriously weakened, or that their financial situation is too weak to meet their commitments, CMB will be authorized to (i) request the strengthening of their financial structures within an appropriate period of time, not exceeding three months, or (ii) without giving any period of time, to temporarily suspend the activities of crypto asset service providers, revoke their operating permits, limit or remove the signing powers of managers and employees who are found to be responsible.
• Crypto-asset service providers will be responsible for damages arising from the unlawful activities of crypto-asset service providers and their failure to fulfill their cash payment and/or crypto-asset delivery obligations. If the damage cannot be compensated by the crypto asset service providers or it is clear that it cannot be compensated, the members of the crypto asset service provider will be responsible to the extent that the damages can be attributed to them according to their fault and the requirements of the situation.
• Crypto asset service providers will be responsible for crypto asset losses arising from acts such as the operation of information systems, all kinds of cyberattacks, information security violations, or any behavior of personnel within the scope of "danger liability" in the Turkish Code of Obligations No. 6098. If the losses cannot be compensated by the crypto asset service providers or it is clear that they cannot be compensated, the members of the crypto asset service provider will be responsible to the extent that the losses can be attributed to them according to their fault and the requirements of the situation. Damages arising from interruptions in the services provided, temporary inability to transmit orders or carry out transactions/transfers, and similar situations without the fault of the service providers will not be considered to be within the scope of this regulation.
• The chairman and members of the board of directors and other members of the crypto asset service provider who embezzle the money or money substitute documents or bills, other goods or crypto assets that have been entrusted to him/her due to his/her duty as a crypto asset service provider or that he/she is obliged to protect, preserve and supervise will be sentenced to imprisonment from eight to fourteen years and a judicial fine of up to five thousand days, and will also be sentenced to compensate the losses of the crypto asset service provider.

Contractual terms that eliminate or limit the liability of crypto asset service providers to their clients will be void

• Any contractual terms that eliminate or limit the liability of crypto asset service providers to their clients will be void.