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Turkey Forces Crypto Exchanges to Report More Customer Information


decrypt.co May 01 2021 15:58, UTC
Reading time: ~3 m

The Turkish government has added cryptocurrency exchanges to the list of firms subject to the country’s anti-money laundering and terrorism financing (AML-TF) regulations.

The regulatory change took immediate effect after the presidential decree—similar to an executive order in the US—was published in the Official Gazette today.

By applying those rules to crypto, the government now subjects the 31 crypto exchanges that operate in the country to the stringent regulation set by the financial watchdog, MASAK.

Vetting customers “like banks”

MASAK has occasionally requested a list of customers from the country’s cryptocurrency exchanges, but otherwise left crypto exchanges alone.

Now MASAK will treat crypto exchanges “just like banks,” Mehmet Türkarslan, legal counsel at a major Turkish crypto exchange, told Decrypt.

Starting today, exchanges have to demand proof of residency and identity documents (far from the norm in Turkey), and periodically check the validity of those documents.

Exchanges must also block any customer blacklisted by the government in sanctions lists, report any suspicious trading activity, and brief the government on any services provided to institutional customers.

“The list goes on and on, and we’re currently trying to figure it all out,” Agah Selim Sesli, a senior researcher at crypto exchange Bitexten, told Decrypt.

A patchwork of regulations

Today’s regulation is the first in a series of anticipated crypto regulations that the government says will come by the end of next week. Sesli expects that such regulation may include rules on taxation and, like in the US, declaration of private wallets.

This regulatory spree builds on prior regulation. Three weeks ago, the central bank banned the use of crypto in everyday payments, and restricted PayPal-like payment processors from dealing with crypto.

Turkey’s Central Bank Governor: Crypto Regulation to Come Within Two Weeks

The flurry of regulation has caused confusion. “The government hasn’t even defined crypto assets, let alone crypto asset service providers,” Osman Gazi Güçlütürk, head of the department IT Law at Kırklareli University, told Decrypt. “These clarifications matter a lot in law.”

The government, which had never before explicitly referenced cryptocurrency exchanges, started introducing regulation on “crypto asset platforms”, and now “crypto asset service providers,” Türkarslan said. “We just assume it means crypto exchanges and act accordingly.”

“Crypto asset service provider” is a reference to the Financial Action Task Force’s description of crypto exchanges as virtual asset service providers (VASP), explained Güçlütürk.

Anti-Money Laundering Rules Targeting DeFi, NFTs Could Be Fatal, Analysts Warn

The European Union relied on that term when deciding how to regulate crypto. But the EU has elaborately defined crypto asset providers before publishing regulations applying to them—unlike the Turkish government, which has dropped the term out of the blue.

The regulation follows the sudden shutdown of two major crypto exchanges that operate in the country. Thodex and Vebitcoin vanished overnight last week, locking up the funds of their customers.

Mertcan Bayraktar, a lawyer who represents several people in a case against Thodex, told Decrypt that regulating crypto exchanges is “of course a good thing,” but the government’s risk-averse approach may dissuade crypto traders from using the platforms.

“Crypto, or blockchain in general, offers amazing opportunities,” he said. “Deterring people from investing or trading crypto when it’s continuously portrayed in a negative light is also a potential risk.”


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