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A senior Turkish government official recently tried to reassure the crypto industry that the country is committed to implementing crypto regulations that can spur innovation.
February 20 Ömer İleri, the deputy chairman of the AK Party, Turkey’s ruling political party, gave an interview with CoinDesk Turkey in which he emphasized that Turkey’s plans to regulate the crypto industry this year will aim to achieve the goals of protecting investors and ensuring the orderliness of trading platforms, while promoting innovation in Turkey’s financial services sector.
The Turkish government is currently in the process of finalizing proposals for a regulatory framework for cryptocurrencies. Although the exact date of publication of the proposed measures and their implementation has not yet been determined, the measures are expected to require Virtual Asset Service Providers (VASPs) to apply for a license from Turkey’s Capital Markets Board (CMB).
The timing of Turkey’s proposed measures appears to be designed, at least in part, to help secure the country’s removal from the Financial Action Task Force (FATF) “Grey List.” From 2021 FATF – the global standard setter for measures against money laundering and terrorist financing (AML/CFT) – it included Turkey in its list of jurisdictions which are subject to increased scrutiny by the FATF due to strategic deficiencies in their frameworks for combating financial crime. In its assessments of Turkey’s legal and regulatory framework to combat financial crime, the FATF has previously assessed that Turkey is only “partially compliant” with FATF standards when it comes to addressing new technologies such as crypto. By introducing a new regulatory framework for cryptocurrencies, Turkey could help ensure its removal from the gray list in the future.
However, Turkey’s push to introduce crypto regulation appears to be driven by larger considerations as well. The Turkish government is increasingly creating plans to regulate the sector along with its goals of encouraging economic growth through innovation in the financial sector. Turkey is encouraging the crypto industry to set up and run events aimed at the development of the domestic crypto industry. On February 27, the crypto exchange giant OKX announced that it launched in Turkey, citing the growing demand for cryptocurrencies in the country as its motivation for the move.
A comprehensive and clear framework for the regulation of cryptoassets could encourage more crypto-businesses to establish a presence in Turkey – which could position the country as a center of innovation in the region alongside the United Arab Emirates (UAE), which has secured its own removal from the FATF Gray List. as described below.
United Arab Emirates removed from FATF gray list to encourage crypto innovation
The UAE’s ambitions to drive innovation in financial services through a well-regulated crypto-asset and blockchain industry have received a major boost with the country’s removal from the FATF’s gray list. On February 23, the FATF announced that it removed the UAE from its gray list due to “significant progress in addressing previously identified strategic deficiencies in AML/CFT” – a clear sign of confidence from the international standard setter that the UAE series of efforts to combat financial crime.
The FATF’s decision to remove the UAE from its gray list is also a vote of confidence in the country’s efforts to establish a strong regulatory framework for virtual asset service providers (VASPs). Like us noted earlierAlthough the efforts of local regulators such as the Virtual Asset Regulatory Authority (VARA), Dubai Financial Services Authority (DFSA) and Abu Dhabi Financial Services Regulatory Authority (FSRA), the UAE has created a regulatory framework for cryptocurrencies that has made it one of leading world hubs for crypto companies and financial institutions seeking regulatory clarity.
To learn more about the UAE regulatory framework for cryptocurrencies, see our UAE Country Guide.
Hong Kong publishes guidelines for safekeeping of cryptocurrencies
Hong Kong’s main bank watchdog has published guidelines for financial institutions that want to offer cryptocurrency custody services. On February 20, the Hong Kong Monetary Authority (HKMA) announced. guidelines which authorized institutions (AIs) should follow when providing custody services for digital assets. The guidance notes that a growing number of AIs in Hong Kong are looking to safeguard digital assets for clients as the asset class grows in popularity.
In the guidelines, the HKMA emphasizes that where AIs offer such services, they should put in place risk management frameworks commensurate with the risks involved. This should include undertaking a risk assessment of planned custody services, should separate client digital assets from AI’s own assets, protect client assets and ensure adequate disclosures are made and records of arrangements are kept. AIs in Hong Kong already engaged in digital asset custody services must report to the HKMA the nature of those services and the arrangements they have in place to manage them no later than six months after the issuance of the HKMA guidelines.
The HKMA’s Custody Guidelines for Banks come as Hong Kong continues to build a reputation as a hub for well-regulated crypto services looking to grow in the Asia-Pacific region. You can view Elliptic’s on-demand webinar on Hong Kong’s crypto regulatory framework here.
British police have enhanced powers to seize cryptocurrencies
Law enforcement agencies in the United Kingdom will be given new powers to seize crypto assets this year thanks to amendments to the UK’s asset seizure powers. The UK government is on 29 February published amendments to the Economic Crime and Corporate Transparency Act which would give the UK’s National Crime Agency (NCA) enhanced powers to undertake expedited seizures of crypto-assets suspected of being used in criminal activity. The measures will allow the police to seize funds directly from exchanges and custodians in the UK and will provide a legal framework for the destruction and disposal of seized assets.
South Africa will develop a regulatory regime for stablecoins
Policymakers in South Africa plan to make recommendations for stablecoin regulation during 2024. reports, the Intergovernmental Task Force on Fintech in South Africa will produce a report by December this year setting out policy options for dealing with stable coin arrangements. While South Africa already is regulations in force that require crypto-asset service providers (CASPs) to comply with anti-money laundering (AML) regulations – but have yet to implement a comprehensive framework that would require stablecoin issuers to ensure adequate reserves, protect the rights of owners or meet other obligations, such as is the case in the EU, Singaporeand other jurisdictions. The Intergovernmental Fintech Working Group’s report, once published, will put South Africa on the path to implementing standards aligned with these other jurisdictions.
To read more about the evolving environment for stablecoin regulations, read Elliptic’s Regulatory outlook for 2024.
Hungary is working on a draft law that would allow institutions to handle cryptocurrencies
Lawmakers in Hungary will begin debating a bill that could open the door to institutional crypto activity in the EU member state. March 1 Bloomberg registered that the Hungarian Ministry of Economy presented a draft law that would allow Hungarian banks, asset managers and investment funds to engage in cryptocurrency-related services. Under the draft law, which would come into effect on June 30 if passed by the Hungarian parliament, the country’s central bank would oversee the provision of cryptocurrency-related services by these entities. The measure is part of Hungary’s efforts to strengthen its crypto regulatory framework ahead of EU implementation Crypto Asset Markets (MiCA)which EU member states will transfer into local regulations from this summer and in 2025.
Global regulation of cryptoregulation
