In a strategic move to strengthen its financial regulations, Turkey is set to introduce stringent laws governing crypto-assets.
This decision is part of a broader effort to address the Financial Action Task Force (FATF) concerns and secure removal from its ‘grey list’ of nations with “inadequate” measures against money laundering and terrorist financing.
Finance Minister Announces New Legislation On Crypto Assets
According to a report from Reuters, the FATF, established by the G7 to safeguard the integrity of the global financial system, placed Turkey on this watchlist in 2021. The country has since worked diligently to align its policies with international standards.
Finance Minister Mehmet Simsek, in a recent parliamentary commission meeting, disclosed that Turkey has successfully complied with 39 of the 40 standards set by the FATF. The sole remaining challenge, he noted, is the regulation of crypto-assets. Simsek stated:
We are on the verge of finalizing a comprehensive legal framework to govern crypto-assets. Our goal is clear: to fortify our financial system and eliminate any grounds for Turkey’s continued presence on the grey list.
While Simsek did not delve into the specifics of the impending legislation, it is expected to encompass robust measures to mitigate risks associated with digital currencies. This includes enhanced scrutiny to prevent their misuse of illicit activities such as money laundering and financing of terrorism.
The FATF had previously highlighted “serious shortcomings” in Turkey’s financial regulatory environment. Notably, the country was urged to augment its mechanisms for freezing assets tied to terrorism and weapons of mass destruction proliferation back in 2019.
Turkey Aims To Address International Concerns On Money Laundering
Turkey’s stance on tightening crypto regulations signals a commitment to international cooperation and financial security. However, the country is giving up on its potential to become a safe harbor for the nascent industry.
If successful, this legislative overhaul could mark a significant milestone in Turkey’s journey to bolster its financial resilience and re-establish its standing in the global financial community.
By addressing the vulnerabilities associated with crypto-assets, Turkey not only aims to satisfy the FATF’s requirements but also to enhance the overall safety and integrity of its financial landscape.
As Bitcoinist reported, Turkey’s evolving stance on cryptocurrencies marks a significant shift in its regulatory approach, contrasting sharply with its previous ambitions to establish itself as a digital asset hub.
In 2022, Turkey was actively working towards becoming a financial center for cryptocurrencies, leveraging the growing interest and bullish sentiment amongst its residents, even in the face of a global bear market in the sector.
This enthusiasm, driven largely by the country’s high inflation rates, led to widespread crypto adoption and the hosting of major industry events, including Istanbul Blockchain Week and the Blockchain Economy Istanbul 2022 Summit.
Ismail H. Polat, a media lecturer at Kadir Has University in Istanbul, highlighted the integral role of inflation in driving the country’s crypto transactions. The Turkish blockchain community, comprising Web3 startups, academics, and digital investors, remained resilient and saw the bear market as an opportunity to “fortify and expand the crypto ecosystem.”
Efforts were made to bring DevCon7, a prominent Ethereum event, to Istanbul, indicating the community’s proactive approach and commitment to the digital asset space. Despite these advancements and the unwavering trust in crypto, the Turkish government’s recent decision to tighten regulations signals a 180-degree turn in its crypto policy.
This change is underscored by the need to address the FATF’s concerns and escape the grey list, necessitating clear and stringent regulations. Erkan Oz, a local economist, emphasized the importance of establishing a legal framework to protect digital asset investments and support the burgeoning blockchain and digital asset sectors. He also noted the slow institutional adoption of crypto in Turkey, attributing it to the lack of clarity and regulation in the ecosystem.
The transition from an aspiring crypto hub to a more regulated environment illustrates Turkey’s delicate balancing act between fostering innovation and ensuring financial stability and security. The country’s crypto community, having actively participated in and contributed to the digital asset space, now finds itself at a crossroads, navigating the complexities of a shifting regulatory landscape.
Cover image from Unsplash, chart from Tradingview.