The Turkish Parliament on Thursday approved a bill that increased oversight of the crypto market, a step that is expected to help in Turkey’s removal from the grey list of global financing watchdog the Financial Action Task Force (FATF), the state-run Anadolu news agency reported.
The legislation outlines requirements and responsibilities for crypto platform management, the range of services platforms can provide and financial and operational standards.
According to the legislation, an approval from Turkey’s market regulator, the Capital Markets Board (SPK), will be required for the establishment of crypto platforms and the board will have the right to temporarily suspend operations.
The issuance, sale and distribution of crypto assets will be regulated by the SPK, in an effort to standardize the process and protect investors from fraud and market manipulation.
Crypto platforms’ financial supervision will be handled by independent audit firms on the SPK’s list, while investors will be exempted from indemnification rights, the right of a party to recover losses they may incur by another party.
The information services of the crypto asset service providers will have to comply with the specific technological criteria set by the Scientific and Technological Research Council of Turkey (TÜBİTAK).
Ankara has been developing this legislation for over two years to regulate the sector and mitigate risks, particularly after the bankruptcy of several smaller trading platforms left thousands without access to their funds.
Turkish Finance Minister Mehmet Şimşek described the approval of the legislation on crypto market as the “final step” Turkey has to take for its removal from FATF’s grey list.
In October 2021 the Paris-based FATF downgraded Turkey to its “grey list” for insufficient supervision of its banking, real estate and other sectors susceptible to money laundering and financing groups on the United Nations’ sanctions list, such as the Islamic State and al-Qaeda. Countries on this list undergo increased monitoring and must collaborate with the FATF to rectify deficiencies.
Turkey became a member of the FATF in 1991, two years after its establishment in 1989.
Minister Şimşek previously said Turkey expected to be removed from the list during FATF’S plenary session in June.
The FATF is holding plenary sessions between June 23 and 28 in Singapore and will release its country assessments on the final day of the meetings.
The watchdog said in February that Ankara “made key reforms” to combat money laundering and terrorism financing, including increasing prosecutions against UN-designated terror groups. “Turkey has substantially completed its action plan,” said the FATF, referring to the pledges made by the Turkish government to the watchdog.
Turkey’s removal from the grey list could enhance the government’s efforts to boost confidence among foreign investors at a time when the Turkish government has been battling soaring consumer prices and a cost-of-living crisis, with inflation standing above 75 percent.
Twenty other countries are on the FATF’s grey list. IMF research shows such a downgrade can strain countries’ ties to foreign banks and investors that follow FATF rankings, so an upgrade in June could boost the Turkish lira and assets.
Şimşek, who has spearheaded a U-turn to more orthodox economic policies over the last year, said in late February, “We have successfully completed our technical studies to remove our country from the grey list.”
“The process of leaving the grey list will be completed with the on-site inspection to be held in June,” he added on social media platform X.