Legal Status and Operational Framework of Crypto Asset Service Providers (CASPs) Under Turkish Law
Introduction
The rapid evolution of the digital asset ecosystem has necessitated a robust regulatory framework globally. In Turkey, a significant milestone was reached with the enactment of Law No. 7518, published in the Official Gazette on July 2, 2024. This legislation amended the Capital Markets Law No. 6362 (CML) to include “Crypto Asset Service Providers” (CASPs) within its scope, subjecting them to a rigorous licensing and oversight mechanism. This article provides a comprehensive analysis of the legal status, operational obligations, and liability regimes of CASPs under the new Turkish regulatory era.
- Conceptual Framework and Legal Definitions
To understand the new regime, one must first analyze the definitions provided under Article 3 of the CML:
Crypto Asset: Intangible assets that can be created and stored electronically using distributed ledger technology or similar technology, distributed over digital networks, and capable of representing value or rights.
Crypto Asset Service Provider (CASP): Refers to platforms, crypto asset custody services, and other entities designated by the Capital Markets Board (CMB) to provide services related to crypto assets.
The broadness of this definition ensures that not only trading platforms but also infrastructure and custody providers are brought under the regulatory umbrella.
- Licensing and Authorization Requirements
Under the new regime, CASPs must obtain prior authorization from the CMB to operate. This is not merely a registration process but a “licensing” regime requiring fulfillment of stringent corporate criteria:
Legal Form: CASPs must be established as a Joint Stock Company (A.Ş.) exclusively dedicated to crypto asset services.
Minimum Capital & Financial Integrity: Entities must meet minimum paid-in capital requirements and maintain specific capital adequacy ratios as determined by the Board.
Fit and Proper Test: Founders and managers must satisfy “financial integrity” and “professional experience” criteria, including a clean criminal record regarding financial crimes.
Technological Infrastructure: Compliance with technical standards determined by the Scientific and Technological Research Council of Turkey (TÜBİTAK) regarding information systems is a prerequisite for authorization.
- Operational Principles and Investor Protection
The law prioritizes “transparency” and “security” through several key mandates:
A. Segregation of Assets
One of the most critical safeguards is the mandatory segregation of assets. Client funds must be held in segregated accounts at banks, while client crypto assets must be tracked separately from the CASP’s own balance sheet. This ensures that in the event of the CASP’s bankruptcy or legal attachment, client assets remain protected and outside the bankruptcy estate.
B. Custody Services
While the principle remains that clients should ideally hold assets in their own wallets, any custody services provided by CASPs must utilize “cold wallets” to mitigate cyber risks, with access protocols subject to CMB audit.
C. Listing Procedures
Platforms are required to establish written “listing procedures” in accordance with CMB principles. This acts as a “gatekeeping” mechanism to prevent the entry of fraudulent or highly speculative assets into the regulated market.
- Legal, Criminal, and Administrative Liability
The liability regime for CASPs is as stringent as that of traditional financial institutions:
Civil Liability: CASPs are held liable for damages arising from their information systems’ operation, cyber-attacks, or unauthorized acts of personnel. Members of the board may be held personally and jointly liable if the damage is caused by their fault.
Criminal Sanctions: Operating as a CASP without authorization is a crime punishable by 3 to 5 years of imprisonment. Furthermore, the misappropriation of client assets is categorized as “Embezzlement” (Zimmet) under Article 110/A of the CML, rather than simple theft.
Administrative Sanctions: Non-compliance can lead to heavy administrative fines, temporary suspension of activities, or revocation of the license.
Conclusion
The amendments introduced by Law No. 7518 have effectively ended the “Wild West” era of crypto assets in Turkey. CASPs are no longer merely tech startups; they are now regulated financial institutions. For legal practitioners and law students, mastering these compliance processes is the key to navigating the future of finance law in an increasingly digitized world.
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