- Turkey is set to introduce landmark legislation regulating its booming cryptocurrency market.
- The new law aims to help Turkey exit the FATF “gray list” by addressing anti-money laundering measures.
- It will establish licensing and safety standards for virtual asset service providers (VASPs).
- Citizens may face low transaction taxes on crypto but no taxes on earnings.
- The bill will also provide a framework for tokenizing real-world assets.
In a move that could reshape the cryptocurrency landscape in Turkey, the government is expected to introduce comprehensive legislation regulating the rapidly growing sector.
The impending bill, anticipated to be tabled before June or later this year, promises to bring much-needed clarity and oversight to the country’s thriving crypto market.
A Booming Crypto Adoption
Turkey has witnessed an astonishing surge in cryptocurrency adoption, with estimates suggesting that two in every five Turkish citizens hold digital assets.
This widespread embrace has propelled Turkey to become the fourth-largest global crypto market, boasting an impressive trading volume of around $170 billion.
Addressing AML Concerns
One of the key drivers behind the upcoming legislation is Turkey’s bid to aid its exit from the Financial Action Task Force (FATF) “gray list,” which is associated with anti-money laundering (AML) measures.
By addressing one of the required action items related to the crypto industry, the government aims to bolster its AML efforts.
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Regulating Virtual Asset Service Providers
At the heart of the new law lies the regulation and licensing of virtual asset service providers (VASPs), such as cryptocurrency exchanges. This move aims to establish industry-wide standards for safe custody and storage of crypto assets, a concern highlighted by the collapse of the Thodex exchange in April 2021.
By imposing stringent requirements on VASPs, the legislation seeks to enhance investor protection and foster a more transparent and secure environment for cryptocurrency transactions.
Taxation and Tokenization
While details are still emerging, industry observers anticipate the introduction of low-rate transaction taxes on cryptocurrency transactions, potentially in the form of a Banking and Insurance Transactions Tax (BSMV) at around 5%.
However, a notable aspect of the legislation is the proposed zero withholding tax rate on earnings from cryptocurrency investments, offering relief to Turkish crypto investors.
Beyond regulating cryptocurrencies, the bill is expected to provide a framework for tokenizing real-world assets, opening up new avenues for innovation and investment in the rapidly evolving digital asset space.
As Turkey navigates the complexities of the cryptocurrency landscape, the impending legislation promises to strike a balance between fostering innovation and maintaining regulatory oversight, positioning the country as a potential hub for crypto-related activities in the region.
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