Name
Global FinTech Guide
Country _ Name
Turkey
SectionTitle
ICO / token sale
Body
Companies and projects have increasingly relied on the sale of digital assets, or tokens, as a means of fundraising. These tokens generally do not grant the holders an ownership interest in the issuing company or project, but may provide governance rights, access rights or other utility. This has been conducted through public sales known as initial coin offerings (ICOs), proliferation through token generation events (TGEs) or private sales, among other mechanisms.  While showing characteristics of traditional methods of fundraising, there are a range of unanswered questions related to the legal classifications of such products. As ICOs and TGEs will usually be distributed online and internationally, there is usually no single legal framework applying to such transaction, and the legal framework of each market in which the tokens may be offered or sold needs to be considered.

Introduction

Attitude of the country towards ICOs/token sales

ICOs and token sales are not regulated under Turkish law.

Regarding the ICOs, the CMB has made certain announcements, which display its approach towards crypto assets, especially on crypto currencies and ICOs, which are summarised below. 

On 27 November 2017, the CMB, has send a general letter to the intermediary institutions, pursuant to their information request, stating that there is neither a regulation, nor a definition of crypto assets under Turkish legislation and as the crypto assets are not listed in the underlying assets that a derivative instrument can be based on, intermediary institutions should not conduct any derivative or spot transaction based on the crypto currencies. 

On 27 September 2018, the CMB, has announced a more comprehensive announcement on crypto assets and ICOs on its website. Highlights of the announcement are as follows:

  • The CMB does not regulate or supervise most practices in which blockchain technologies are generally used, such as crypto currency offerings and token offerings.
  • The CMB considers ICOs to be highly risky and speculative investment models, so investors intending to purchase digital assets are therefore warned to consider carefully what is promised in exchange for digital assets. Below risks are mentioned by the CMB, in its announcement:
    • Most ICOs are not regulated or supervised by any regulatory bodies due to their structure.
    • Similar to crypto currency, token values may be subject to considerable fluctuations.
    • Collected funds may not be used for the initially mentioned purposes.
    • Documentation provided to purchaser for the ICO may be incomplete or misleading.
    • Investment project may fail, or the investment funds may be lost completely, as the projects funded through such practices are in general at an early stage.

  • In the same announcement, the CMB also provided an update on the legal framework for crowdfunding activities, which is, at the time being, introduced by the CMB. The CMB further pointed out that the token sales may have certain similarities with public offerings and crowdfunding, but also differ from mentioned transactions in several aspects, meaning that the status of token sale and possibility of their supervision by the CMB would vary on a case-by-case basis. That is to say, the CMB does not totally remove its supervision power on the digital assets’ sales and its approach and position needs to be analysed, depending on the specific circumstances of each token sales.

If the tokens are based on stocks/indices traded on stock exchanges they may be regarded as derivative instruments. Derivative instruments are defined in a very broad way in the CML Derivative instruments has the meaning of following derivative instrument
s and other derivative instruments that CMB determined that they falls within such scope, (i) derivatives instruments giving the right to buy, sell, or exchange securities with each other (ii) derivatives instruments, values of which are subject to price or return of a security; foreign exchange rate, price of any goods, precious metals or stones, or price variance of these; statistics published by institutions approved by the CMB and any changes in them; enabling the transfer of credit risk, which have measurement values, such as energy prices and climate variability, and depending on an index level that is determined by these items or changes in this index level; the derivatives of the foregoing instruments and giving the right to exchange the listed underlying assets, and (iii) leveraged transactions on foreign exchange, precious metals. Also, as explained under section f. (2), as crypto assets, their use in payments is prohibited.

Legal affairs

Presence of any explicit regulation on ICOs and the issuance of token/coins

No, unless it falls within the scope of CML.

Presence of any explicit restrictions on ICOs or the issuance, distribution and/or transfer of token/coins

If they fall within the scope of the CML, distribution and/or transfer of token/coins will be subject to capital market rules. 

Obligations and requirements to issue token/coins

As long as they do not fall within the scope of derivatives under the CML, no license is required for issuance of token/coins or the trading in token/coins.

Classification of token/coins in the jurisdiction

Regulation on the Use of Crypto-Assets in Payments Article 3 lists what cannot be defined as crypto-assets. According to this article, crypto asset refers to intangible assets that are created virtually using distributed ledger technology and distributed over digital networks, but that are not considered fiat money, electronic money, payment instruments, securities, or other capital market instruments. Also, according to the said regulation, crypto assets cannot be used in the provision of payment. In this regard, tokens/coins cannot be recognised as currency/payment instrument. 

The token/coins cannot be recognised as securities. If the tokens are based on stocks/indices traded on stock exchanges they may be regarded as derivative instruments. Please see question (i) for the definition of derivatives under Turkish law.

Presence of a duty to publish a prospectus bevor offering token/coins to investors

No, unless they are regarded as derivatives under the CML.

Presence of AML/KYC requirements that are needed to be fulfilled regarding (i) the initial issuance of token/coins and (ii) any following transfer of token/coins to third parties

According to The Regulation on Amendment of Regulation on the Measures for Prevention of Laundering Proceeds of Crime and Terrorist Financing, crypto asset service providers are considered as obligated parties to comply with anti-money laundering rules. Crypto asset service providers are defined by the Turkish Financial Crimes Investigation Board as “platforms that mediate the buying and selling of crypto assets through electronic trading platforms”. Therefore, initial issuance and following transfers of token/coins will be subject to AML/KYC requirements.

Additional comments regarding (i) the legal situation for ICOs/token/coins and (ii) any following transfer of token/coins to third parties

The legal uncertainty and lack of regulation creates legal risks. However, crypto assets are vastly popular in Turkey.

Economic conditions

Market size for ICOs/token sales and existence of any previous regulated ICO/token sales in the jurisdiction

No data is available.

Additional comments regarding the economic s

ituation for ICOs/token sales or what companies must be aware of in this business area A regulation from the CMA is awaited, however, it is unknown when the draft will be served.

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