Planned Amendments regarding Crypto Assets in the Capital Markets Law

Within the framework of the Minister’s announcement, we summarized our understanding of the planned amendments for you:

• The definition of crypto assets will be included within the scope of the Law

Within the framework of the planned amendments, definitions of wallet, crypto asset, crypto asset trading platform (“Platform”), crypto asset service provider, and crypto asset custody service will be added to the Law. Crypto assets will be defined as intangible assets that can be created and stored virtually 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 organizations designated to provide services related to crypto assets as per the secondary regulations to be made based on the Law.

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

The Platforms to be established and start operating will need to obtain permission of the Capital Markets Board (“CMB”). Until the secondary regulation comes into force, existing Platforms will be able to continue their activities. However, until then it will not be permissible to establish a new Platform. After the secondary regulations come into force, those already operating as a Platform as of the date when the regulations in the Law come into force will have to apply to the CMB to obtain an operating permit within the period specified in the secondary regulation.

• Various measures and sanctions will be applied to persons who act in violation of the crypto asset regulations in the Law

Natural persons and officials of legal entities who are found to be operating as crypto asset service providers without permission will be punished with imprisonment for a period ranging from three to five years and a judicial fine ranging from five thousand days to ten thousand days.

Solicitation activities directed at persons residing in Turkey by Platforms located abroad will be considered as unauthorized crypto asset services. If Platforms located abroad opens a business in Turkey, creates a Turkish website, or carries out promotional and marketing activities regarding the crypto asset services directly and/or through persons or institutions resident in Turkey, such activities will be considered to be solicitation directed at persons residing in Turkey. Platforms located abroad will be required to terminate such activities directed at persons residing in Turkey within 1 month following the date on which the amendments will come into force.

When the chairman or the members of the board of directors, other members, or the natural person shareholders who legally or effectively hold the management or control of the crypto asset service provider will be found to have committed the crime of embezzlement (e.g. embezzlement of crypto assets, whether their own or someone else's), they will be personally liable with embezzlement, and upon the request of the CMB, a court may directly declare their bankruptcy to ensure that damages can be primarily compensated from the embezzled amounts (damages to be claimed will be limited to the damage they cause to customers).

• Cash and crypto assets belonging to customers will be kept separate from the assets of crypto asset service providers

Cash and crypto assets belonging to customers will be kept separate from the assets of crypto asset service providers and records will also be kept separately. The cash and crypto assets of the customers with the crypto asset service providers (for the debts of the crypto asset service providers); or the assets of the crypto asset service providers (for the debts of the customer) cannot be i) seized even if it is for public receivables, ii) pledged without the prior written consent of the customers, iii) included in the bankruptcy estate and iv) subjected to precautionary measures.

• It becomes possible to sell and distribute crypto assets through crowdfunding

CMB will be authorized to determine whether the sale or distribution of crypto assets i) that develops distributed ledger technology or a similar technological infrastructure, ii) whose value cannot be separated from this technology and iii) that are approved by the Scientific and Technological Research Council of Turkey (TÜBİTAK) within the framework of the procedures and principles to be determined can be made by collecting money from the public through crowdfunding, without being subject to the rules set out for share-based crowdfunding or debt-based crowdfunding.

• For those who prefer not to keep their crypto assets in their own wallets, crypto assets will be stored by authorized banks or institutions

It will be regulated that the crypto assets belonging to the customers of the Platforms should essentially be kept in the customers' own wallets; and that the losses that the customers may incur due to not keeping the crypto assets in their own wallets are the responsibility of the customers, without prejudice to the responsibilities of the crypto asset service providers.

Custody services for crypto assets that customers do not prefer to keep in their own wallets will be provided by authorized banks and other institutions determined by the CMB. In addition, it will be regulated that customers’ cash should essentially be kept in banks.

• Financial audit and information systems audit of crypto asset service providers will be carried out by independent audit firms authorized by the CMB

Financial audit and information systems audit of crypto asset service providers will be carried out by independent audit firms listed by the CMB. Additional procedures and principles regarding the information systems audit of crypto asset service providers will be determined by the CMB.