Turkey is seeking to regulate its crypto market to get off the Financial Action Task Force’s (FATF) “grey list”, with the country’s new rules likely to focus on licensing and taxation. This comes as soaring inflation and a plunging lira currency have driven a demand for alternative assets.
FATF, a Paris-based financial watchdog, placed Turkey on its grey list of countries at risk of money laundering and other financial crimes in 2021. In October, Finance Minister Mehmet Simsek said Ankara would bring in new legislation covering crypto-assets as soon as possible to be removed from the list.
According to a report by blockchain analytics firm Chainalysis, Turkey ranked fourth globally in raw crypto transaction volumes, at approximately $170 billion over the last year. It was also 12th in the firm’s crypto adoption index, reflecting Turks’ desire to counteract currency devaluation and youths’ interest in new technology.
The new regulations may include capital adequacy requirements, measures to improve digital security, custody services, proof of reserves, and licensing standards to prevent abuse of the system, according to Bora Erdamar, director at BlockchainIST Center.
Mucahit Donmez, chief executive of crypto currency exchange Binance Turkey, said there is currently a lack of regulation in the area, but ensuring the security of users’ assets and setting up certain criteria in terms of minimum capital requirements, listings and custody, and requirements for platforms to obtain operation licenses will contribute positively to the sector.
The government said work on regulation for crypto asset service providers and taxation of digital virtual assets will be on the agenda for 2024. BlockchainIST Center’s Erdamar added that a reasonable taxation policy, that will not scare off investors, will strengthen and reinforce trust for the sector.
In 2021, authorities banned the use of crypto assets for payments after some local exchanges were investigated for fraud. Onur Altan Tan, board member at Futurance Finance Tech & Fexobit crypto currency platform, said they are expecting the new regulation to detail out licensing criteria for platforms and bring taxation for users.
Overall, Turkey has a great potential in blockchain technology and cryptoassets, and the new regulations could help the country to get off the FATF grey list.
Copyright 2023 Thomson Reuters.