Expected Secondary Regulations on Crypto Assets Published!

On March 13, the highly anticipated and crucial regulations for the crypto world were published. Given the short compliance timelines, these regulations are set to be a top priority in the sector in the coming days.

In line with the amendments to the Capital Markets Law (Law), the Capital Markets Board (Board) was authorized to determine the principles and rules for the establishment, shareholders, managers, and capital of crypto asset service providers. Those wishing to start crypto services must first apply to the Board to meet the requirements outlined in the secondary regulations and submit the necessary application for activity approval.

The long-awaited secondary regulations were published on 13 March 2025, in communiqes in the Official Gazette.

Communique on the Operational Principles and Capital Adequacy of Crypto Asset Service Providers

The communique outlines the services and activities that crypto asset service providers (KVHS) can offer, the principles for listing and delisting crypto assets, as well as the principles regarding their settlement systems, capital, and capital adequacy. Key points from the regulation are as follows:

- Crypto assets: (i) receiving and executing buy-sell orders, (ii) settlement, transfer, and custody services, (iii) facilitating initial sales or distributions, (iv) investment consultancy and financial analysis services, and other services determined by the Board can only be carried out by KVHS authorized by the Board.

- Platforms must have a minimum capital of 150,000,000 Turkish lira, and custodians must have 500,000,000 Turkish lira.

- To carry out the services and activities under this regulation, approval from the Board is required. However, KVHS are not subject to the Board approval for crypto asset purchases, sales, and transfers for their own wallets.

- Regarding platform operations:

* Customer orders must be executed in accordance with the order execution policy and framework agreements.

* Customer cash receivables must be forwarded to the bank on the day the customer request is made.

* Customer transactions (purchases, sales, and transfers) and customer assets must be tracked separately from platform accounts in the institution's record system, ensuring they are complete, accurate, and up to date.

- A major restriction: leveraged transactions cannot be carried out on listed crypto assets on platforms. In this context, listed crypto assets cannot be subject to derivative contracts, margin trading, short selling, or lending.

- According to the regulation, platforms must hold liquid reserves equivalent to 3% of their customers' assets. The Board will determine which assets can be included in the liquid reserve calculations and may decide to exclude certain crypto assets from reserves.

- Platforms may store crypto assets of customers in one or more wallets in accordance with capital adequacy requirements.

- The current value of any asset in the platform's liquid reserves cannot exceed 20% of the portfolio's weight. However, for crypto assets listed within the last year and those with a total market value of under 5 billion US dollars, this ratio will be applied as 10%.

- To obtain an operating license, platforms must establish security infrastructure compliant with TÜBİTAK infrastructure criteria.

- Provided that no promotional, advertising, or marketing activities are carried out for residents in Turkey, services provided by KVHS located abroad to individuals in Turkey, accounts opened with those entities, cash and crypto assets sent to those accounts, and transactions conducted through those accounts are excluded from the scope of the regulation.

You can access the full text of the regulation here.

Communique on the Establishment and Operational Principles of Crypto Asset Service Providers

In summary, this communique covers:

- The establishment, operations, procedures and principles of KVHS, their founders and shareholders, share transfers, managers, staff, organization, internal audit, internal control, and risk management systems, information systems, technological infrastructure, document record systems, independent audits, and reserve proof audits. According to the regulation:

- To obtain permission from the Board, KVHS must: (i) be joint-stock companies, (ii) have all shares registered in their name, and (iii) issue shares for cash consideration.

- Moreover, the capital of KVHS must not be less than the minimum capital amount determined by the Board, must be fully paid in cash, and their equity must not be less than this amount. Also, the subject matter of the companies' articles of association should only define the activities for which they are authorized by the Board.

- Platforms' commercial titles must include “crypto asset trading platform”; entities providing crypto asset custody services must include “crypto asset custody organization” in their titles.

- If KVHS wish to use a trademark related to their business name or activities, they must obtain permission from the Board. All written and visual media advertisements, announcements, and correspondence must include the commercial title.

- KVHS’s trade names can only be changed when the management control or majority voting rights of the partner changes, or due to a legal obligation.

- Board members and senior managers must have experience in financial markets, financial competency, and a reputable background.

- For the organizational and ownership structure, shareholders holding 10% or more of the shares directly or indirectly must provide documents proving their financial strength and reputable history.

- KVHS must establish and effectively operate internal control, internal audit, and risk management systems.

- The organizations must be subject to independent audits and submit activity reports to the Capital Markets Board periodically.

- Crypto assets will be subject to reserve proof audits, and the audit results must be shared with the public at certain intervals.

You can access the full version of the regulation here.

Finally, amendments to information systems should be mentioned. The Communique on Amendments to the Information Systems Independent Audit Communique (Audit Communique), which introduces new regulations including for KVHS, and the Communique on the Principles and Procedures Regarding Information Systems Management (Principles and Procedures Communique) have been published in the Official Gazette.

Under the Principles and Procedures Communique, while the obligation to keep primary and secondary systems within the country remains, the new regulation allows the use of foreign cloud services.

Other points emphasized in the communiques include the clarification of information security and risk management policies and the transition periods allowed for compliance.

You can access the full version of the Principles and Procedures Communique here and the Audit Communique here.

Tansition Periods

Transition periods have been provided to meet the obligations introduced by the new regulations. In summary:

• According to the "Communique on the Working Principles and Capital Adequacy of Crypto Asset Service Providers," Articles 7, 8, 11 to 13, 16 to 23, and 32 to 48 will enter into force on 30 June 2025, while other articles will come into force on the publication date, 13 March 2025.
• According to the "Communique on the Establishment and Operational Principles of Crypto Asset Service Providers," Articles 10 to 12, 24, 39, 41, 46, and 47 will enter into force on 31 March 2025; Articles 9, 13, 14, 15, 18, 23, 26 to 29, 31 to 34, 36, 38, 42 to 45, and Articles 20(1) and 20(3) and Article 40(2) will come into force on 30 June 2025, while other provisions will be effective from the publication date.
• According to the Principles and Procedures Communique for KVHS-related provisions, Article 27 on information systems continuity must comply by 31 December 2025, and Article 29 (3) on internal audit activities must comply by 31 December 2026. The other provisions of the Principles and Procedures Communique will come into force on 13 March 2025. It should also be noted that this legislation applies not only to KVHS but also to Borsa İstanbul A.Ş., stock exchanges, market operators, other organized marketplaces, pension investment funds, İstanbul Settlement and Custody Bank, Central Securities Depository A.Ş., portfolio custodians, Capital Markets Licensing Registry and Training Institution, capital market institutions, publicly traded companies, Turkey Capital Markets Association, and the Turkey Valuation Experts Association.

One notable point regarding these transition periods is that newly established organizations must complete the necessary licensing procedures within 6 months after obtaining permission from the Board to get operational approval. Another point to highlight is that, according to the "Regulation on the Establishment and Operational Principles of Crypto Asset Service Providers," custodial organizations listed in the "Active Providers List" as of 13 March 2025, and those custodial organizations that have applied before this date, must apply for operational approval by 30 June 2025.

While these regulations bring significant changes to the crypto asset ecosystem, companies will need to ensure swift compliance. Additional clarifications and guides from the Board are also expected in the coming days.