In a bid to enhance its standing on the international stage, Turkey is actively preparing new legislation to govern crypto-assets.
This move is primarily aimed at convincing the international crime watchdog, the Financial Action Task Force (FATF), to remove Turkey from its grey list.This list comprises countries that, according to the FATF, have not taken adequate measures to curb money laundering and terrorist financing.
The FATF, an intergovernmental organization established by the G7 group of advanced economies, is tasked with setting standards and promoting effective implementation of legal, regulatory, and operational measures for combating money laundering, terrorist financing, and other related threats to the integrity of the international financial system. In 2021, the FATF downgraded Turkey to its grey list, signaling concerns over the country’s regulatory framework and its commitment to international standards.
Addressing these concerns, Finance Minister Mehmet Simsek spoke to a parliamentary commission, highlighting that a recent FATF report found Turkey to be in compliance with 39 of the watchdog’s 40 standards.
The only area of non-compliance pertained to the regulation of crypto assets. Simsek emphasized, “The only remaining issue within the scope of technical compliance is the work related to crypto assets.” He further added that the government would soon present a legislative proposal concerning crypto-assets to the parliament. If this proposal is accepted and no other political considerations emerge, there would be no justification for Turkey’s continued presence on the grey list.
However, the specifics of the proposed legal changes remain undisclosed. It’s worth noting that the FATF had previously warned Turkey in 2019 about “serious shortcomings” in its regulatory framework. These included the need to bolster measures to freeze assets linked to terrorism and the proliferation of weapons of mass destruction.
The rise of cryptocurrencies and digital assets has presented a unique challenge for regulators worldwide. Their decentralized nature, combined with the potential for anonymity, makes them attractive for illicit activities, including money laundering and terrorist financing. As such, countries are under increasing pressure to develop robust regulatory frameworks that strike a balance between fostering innovation and ensuring financial security.
Turkey’s move to strengthen its crypto regulations is a testament to the growing recognition of the importance of this asset class and its potential implications for the broader financial system. As the country seeks to align itself with international standards, it will be crucial to monitor how these regulatory changes impact the domestic crypto market and whether they achieve the desired outcome of removing Turkey from the FATF’s grey list.