Turkey, as one of the leading countries in cryptocurrency trading, is working on regulations to ensure credibility and oversight in the sector. Reuters published an article on possible legal regulations that will include licensing and taxation in the digital currency market.
Turkey, which ranks fourth globally in crypto trading, has stepped up its efforts to combat international financial crime, with industry officials aiming to remove the country from the gray list. Against this backdrop, Turkey is expected to focus on new rules to regulate the crypto market, particularly in the areas of licensing and taxation.
Inflation increases interest in the cryptocurrency market
Ankara announced new regulations last month amid a long-running surge in crypto trading as rising inflation and the depreciation of the lira boosted demand for alternative assets. At the same time, Turkey is trying to address concerns raised by being among the countries gray-listed by the Paris-based Financial Action Task Force on Anti-Money Laundering (FATF).
Bora Erdamar, director of BlockchainIST Center, a research and development center in the field of blockchain technology, stated that the introduction of certain licensing standards will be one of the priorities in the new regulatory process. These standards could cover areas such as capital adequacy, digital security, custody services and proof of reserves, as well as preventing abuse of the system.
Cryptocurrency markets find a solution to reduce the impact of inflation
Turkey’s rise in crypto trading was confirmed by Chainalytic’s report, which ranked it fourth globally in terms of raw crypto trading volume last year, behind the US, India and the UK. The report also emphasized that the country’s crypto adoption index ranked 12th, reflecting the Turkish desire to hedge against the depreciation of the lira and the interest of the young population in new technology.
Finance Minister Mehmet Şimşek said in October that Ankara plans to comply with the FATF’s latest recommendation by enacting new legislation covering crypto-assets as soon as possible, which would allow Turkey to be removed from the gray list, positively impacting the country’s investment rating and reputation. While it is accepted that countries on the gray list do not effectively combat money laundering and other financial crimes, these countries need to actively cooperate with the FATF to address these deficiencies.
In the cryptocurrency market, which has shown significant growth in the last two years, Binance Turkey CEO Mücahit Dönmez said, “Interest in crypto assets in Turkey is constantly increasing, but there is currently a lack of regulation in this area.” Dönmez said, “We think that ensuring the asset security of users, minimum capital requirements, listing and custody conditions, and establishing certain criteria for platforms to obtain operating licenses will contribute positively to the sector.”
The boom in Turkey’s cryptocurrency market has been driven by double-digit inflation, which reached 85 percent last year and fell to 61 percent last month, and the depreciation of the lira against the dollar by more than 80 percent in five years. According to a survey by Binance Research, the majority of Turkish investors joined the crypto market about two years ago, while 27 percent entered the sector last year. This shows that interest in the sector continues.
It can increase confidence in crypto
The government stated that regulation of crypto asset service providers and taxation of digital virtual assets will be on the agenda for 2024. Erdamar from BlockchainIST Center said, “Turkey has a great potential in blockchain technology and crypto assets. A reasonable taxation policy that will not scare investors will strengthen and consolidate confidence in the sector.”
In 2021, after fraud investigations were launched at some local exchanges, authorities banned the use of cryptoassets for payments. Users of some smaller cryptocurrency trading platforms had problems accessing and withdrawing funds from their accounts as the firms’ systems crashed and investors filed thousands of criminal complaints with the courts. Onur Altan Tan, board member of Futurance Finance Tech & Fexobit cryptocurrency platform, said they expect the new regulation to detail licensing criteria for platforms and impose taxes on users. “More than two years of work has been done on this regulation, including consultation meetings with cryptocurrency exchange firms, so it should be ready to be presented to parliament,” Tan said.