Turkey can be called as one of the largest and fastest crypto adopters globally. Over 5 million people currently own crypto in Turkey. Recent data reveals that more than 52% of Turkish adults aged 18-60 now own crypto. As of May 2023, over half of Turkish adults are crypto owners. There is no legal investor protection scheme for crypto assets. The Turkish fintech sector, specially cryptocurrency, has seen some significant growth in 2023. The country is about to introduce its first-ever legislation to regulate the crypto sector. 

In this report by Coinpedia, we are about to discuss the latest development in the Turkish framework related to cryptocurrency. Let us dive in!

Crypto adoption in Turkey

The country exhibits a robust rate of crypto adoption and Turkey’s crypto regulation has a lot in sync with it, with two out of every five citizens holding crypto assets. It is mentioned that approximately 40% of Turkish people reported investing in crypto, making crypto one of Turkey’s most popular asset classes. The research by Binance disclosed that over the past three years, Turkey’s rate of crypto adoption has increased by 24%. 

• The percentage growth had it climb to 12th spot on the Chainalysis’ global crypto adoption index for 2023, surpassing major larger economies.
• Turkey is the 4th-largest market in terms of crypto transaction volume worldwide. 
• During Turkey’s earthquake relief efforts, Binance airdropped $100 worth of BNB to affected users.
• Crypto exchange OKX entered Turkey as a part of global expansion plan in February, 2024.

Crypto Regulations in Turkey

In 2020, Turkey ranked 14th among crypto investors around the world. The heightened increase in crypto interest in Turkey made many global crypto asset exchange platforms open local operations. 

• In 2019, the Parliament passed the 11th Development Plan that outlined, among other things, the implementation of a blockchain-based digital central bank currency and the establishment of the Association of Payment Services and Electronic Money Institutions.
• In April 2021, the Regulation on the Disuse of Crypto Assets in Payments, that is, Turkey’s first legislation relating to crypto assets took place. The regulation does not prohibit crypto assets outright, nor does it prohibit the purchase, sale, offering, transfer or custody of crypto assets and the platforms providing such services like crypto exchanges.
• The regulation does prohibit the usage of crypto assets directly or indirectly in payments, the development of business models by banks or payment institutions , and the payment places and electronic money institutions from acting in intermediary activities for platforms providing purchase, sale, custody, transfer or offering of crypto assets.
• Following amendments made to the Anti-Money Laundering Regulation in May 1, 2021, crypto asset service providers and saving finance companies are deemed to be obligors within the scope of the legislation on the prevention of laundering crime proceeds and financing of terrorism.
• These service providers are liable for the fulfillment of the obligations stipulated under the Anti-Money Laundering Regulation and other relevant legislation in the area. Obligations include conducting know-your-customer procedures, notifying suspicious transactions, periodic reporting, and retention and submission of information to the Financial Crimes Investigation Board of Turkey.
• It was recently announced by the Presidency that a draft bill regarding the detailed regulation of crypto assets and platforms has been submitted to the Parliament for review and development. It is expected that a major piece of legislation on crypto assets will be introduced in Turkey in the very near future.
• In a recent interview on January 10,2024, Turkish ministry of Treasury and finance confirmed that the crypto framework tailored for the Turkish market is about to be complete.
• Turkey’s crypto regulations aim to mitigate the risks associated with crypto trading, protecting ordinary investors , and including legal definitions of crucial terms like “crypto assets” , “crypto wallets” and “crypto asset service providers.”
• Additionally, it will mandate the crypto platforms to acquire licenses from Turkey’s Capital Markets Board (CMB).

Legal Status Overview

Cryptocurrencies like Bitcoin are legal in Turkey. However, they maintain a complex status here! While not classified as illegal, their usage comes with certain boundaries established by the governing authorities like the Central Bank of the Republic of Turkey.

Crypto Taxation Laws

The Ministry of Treasury and finance is responsible for regulating crypto taxation in Turkey. Tax depends on the nature of transaction and profits. Here, VAT applies when cryptocurrency is used as payment. If it is held as a capital asset and sold profitably, the profit incurs income tax. Non-residents have to pay a withholding tax on cryptocurrency payments, with rates set by tax treaties. Profits from token sales are income-taxed based on sale profit. Cryptocurrency held over a year and sold profitably is taxed as a long-term capital gain, which has a lower rate. Transactions also stick to AML and KYC regulations, requiring investor identification.

Future Prospects and Challenges

It is evident that cryptocurrency and blockchain will become even more popular in future. It is estimated that 5.5% of Turkish own digital currency presently. Turkey’s inflation rate recently surpassed 83%. Moreover, salaries often do not keep up with inflation, which means earners have decreasing purchasing power. Many see digital currencies as a refuge from Turkey’s sky-high inflation and the steep devaluation of the lira. 

They call crypto “savior” in Turkey! Hence, we hope for a better future for cryptocurrencies in the region.

Conclusion

With an advancement in Turkey’s crypto sector everyday, we hope for a better framework in terms of the crypto regulatory environment. 2024 could be a revolutionary year for the crypto scenario in Turkey and we see it getting better with days!