Turkey Advances Cryptocurrency Regulation Legislation

Turkey Introduces Cryptocurrency Regulation in Effort to Exit FATF Grey List
In a decisive move to regulate cryptocurrency operations within its borders, the Turkish government has passed a proposal amending the Capital Markets Law, aimed at overseeing crypto asset service providers. This legislative action, approved by parliament’s Planning and Budget Committee, comes as part of Ankara’s strategy to be removed from the Financial Action Task Force’s (FATF) grey list during its annual meeting in Singapore on June 28. Since 2021, Turkey has faced criticism for not implementing essential reforms against money laundering and terrorist financing, with reports indicating the misuse of cryptocurrencies by terrorist groups like ISIS through Turkish intermediaries.
The new regulations mandate crypto asset service providers to obtain authorization from the Capital Markets Board (SPK), with unauthorized activities facing criminal penalties, including imprisonment. The SPK will also issue secondary legislation outlining the operational guidelines these providers must follow, holding them accountable for any unlawful activities and breaches of information security. Current service providers have a one-month window to apply for an operating license upon the law’s enactment, while foreign crypto firms are given a three-month deadline to halt activities targeting Turkish residents or face classification as unauthorized providers.
This legislative move is part of Turkey’s broader efforts to address financial crimes and improve its international image. The FATF had placed Turkey on its grey list in October 2021 due to shortcomings in combating money laundering and terrorist financing. Despite some progress, a FATF report in July 2023 highlighted the need for Turkey to undertake more complex investigations and prioritize actions against UN-designated terrorist groups.
The regulation of cryptocurrencies is seen as a critical step for Turkey, not only to curb illegal financial flows but also to attract Western investors amid a foreign capital shortage highlighted by Finance Minister Mehmet Şimşek. Following President Recep Tayyip Erdogan’s re-election, a crackdown on mafia groups and gangs has also been initiated, indicating a renewed focus on combating organized crime and terrorism financing within the country.