Turkey to set up digital currency framework by 2024

Turkey has hinted at plans to overhaul its virtual currency framework for a new rule book focused on safeguarding the interests of investors in the sector.

The country’s ambitious plans were disclosed in the 2024 Turkish Presidential Annual Program published in its official gazette at the end of October. According to the 497-page document, the Turkish government is keen on introducing new definitions for key terms to encourage regulatory clarity.

Under the proposed framework, the government will offer modern definitions for virtual asset service providers to include exchanges and brokers. The document hinted at a new tax regime for digital assets to reflect the country’s ambitious plans for the digital economy in Article 400.5.

Pundits are predicting the launch of a new licensing regime for service providers in Turkey with the prerequisites of a clear separation of customers’ funds from proprietary assets mandatory. Amid plans by the Turkish central bank to roll out a central bank digital currency (CBDC), it appears that the framework could contain provisions to promote the use of digital lira.

Industry players are eyeing a 2024 launch date for the operation of the new playbook for digital assets. The plans come on the heels of the collapse of Thodex—one of Turkey’s largest virtual currency exchanges—erasing the fortunes of thousands of retail traders.

Turkish authorities have prosecuted Thodex’s founder Faruk Fatih Ozer, resulting in an 11,196-year sentence after a chaotic extradition battle. Turkey has expressed a keen interest in preventing another industry implosion by upping its enforcement activity over industry players with varying degrees of success.

Attempts to muzzle the virtual currency sector have fallen short with millions of citizens flocking to the asset class to protect their wealth from galloping inflation. According to one study, over 52% of Turkish residents hold virtual currencies, splitting their holdings between BTC and stablecoin Tether (USDT).

Pundits argue that clear and concise regulations will be a decisive factor in attracting new users to the space with on-chain data indicating a steady upward trajectory for virtual currency adoption.

Minting new legal frameworks

Several jurisdictions are ditching their old frameworks for digital currencies in favor of new rulebooks, keeping pace with the speed of innovation in recent years. For others, the large-scale collapses of Web3 companies like Celsius and FTX have triggered the need for new investor protection rules to prevent a recurrence.

In the summer, Namibia, Oman, and Singapore teased new robust frameworks focused on safety and interoperability. On the global front, the International Monetary Fund (IMF) and the G20 have been working on an international framework to promote uniformity and crack down on regulatory arbitrage.

CoinGeek Conversations with Yves Mersch: Digital currency regulation and the role of BSV blockchain