Understanding Web3 Legal - Turkish CEX Licence - Issue 14

In this edition, we dive into the recent developments regarding the principles and regulations for "Crypto Asset Trading Platforms" as outlined in the latest bulletin from the Capital Markets Board of Turkey (SPK). Here's what you need to know:

New Regulations for Crypto Asset Trading Platforms

1. Capital Requirement: The SPK has set a minimum paid-in capital requirement of 50,000,000 TL for Crypto Asset Service Providers. Additionally, their equity capital must not fall below this threshold.

• Analysis: This requirement is significantly lower than anticipated, suggesting a lower entry barrier into the market. As a result, we might see an influx of players in the space. However, it also implies that companies won't be able to dip into this capital for other uses.

2. Corporate Structure: These platforms must be established as joint-stock companies (Anonim ?irket) with registered shares and must include "crypto asset trading platform" in their official title.

• Analysis: The requirement for a joint-stock company ensures a robust liability regime. Registered shares provide clarity and make transfers more challenging, which is a reasonable approach for ensuring transparency.

3. Board of Directors: The Board of Directors must consist of at least three members.

• Analysis: While having an odd number and a larger board is recommended for better corporate governance, a minimum of five members would have been more effective. Including an independent board member could also add value.

4. Exclusive Business Focus: The company's business activities must be exclusively related to crypto asset trading, initial sales or distribution, exchange, transfer, and the necessary custodial services.

• Analysis: This means that these companies can only operate as platforms, ensuring a clear and focused business model.

5. Active Platforms Only: Applications from companies that declare they have commenced operations but have no customers or custodial balances as of the application date will not be processed.

• Analysis: This effectively weeds out last-minute applicants, ensuring that only active platforms are considered.

6. Educational Requirements for Board Members: The majority of the board members must have graduated from a four-year university program.

• Analysis: While this is a positive step, there is room for stricter requirements. Additional certifications such as SPL Level 3, Derivative Instruments, CAMS, or CIPM could be considered to raise the bar.

7. Restrictions on Founders, Partners, and Executives: Individuals who have voluntarily relinquished their operating licenses, those with a 10% or greater stake or control in previously licensed activities, and those lacking financial integrity, honesty, or reputation, are prohibited from being founders, partners, or executives.

• Analysis: This provision also extends to those convicted of certain crimes, ensuring that only credible individuals are involved in the management of these platforms.

8. Application Procedures: There is no change in the information and documents to be submitted to the SPK for applications, but the Board retains the authority to increase the minimum capital requirement.

• Analysis: The continuity in application procedures provides stability, while the SPK’s authority to adjust the capital requirement allows flexibility as the market evolves.

Conclusion

As we move into this new regulatory era, it's clear that the SPK is striving to strike a balance between fostering innovation in the crypto space and ensuring robust oversight. These regulations, while lighter than expected, set a foundation for a more organized and secure market. We will be watching closely as the market responds to these changes.

Stay tuned for more insights and developments in the next issue!