Answer ... (a) Crowdfunding, peer-to-peer lending
Crowdfunding is a newly regulated field in Turkish law. It is mainly regulated under Law 6362 on Capital Markets and the Communiqué on Equity-Based Crowdfunding of 3 October 2019.
As per the communiqué, both companies and projects which meet the criteria set forth in the communiqué may be funded through crowdfunding platforms, by providing company shares to prospective investors. For companies, the criteria are as follows:
- engagement in technology and/or production activities;
- incorporation as a joint stock company;
- incorporation within five years of the crowdfunding announcement;
- provision and regular monitoring, maintenance and control of a company website;
- compliance with certain requirements in terms of company revenues; and
- the status of a private company that is not controlled by another legal person.
For projects, the criteria are as follows:
- subject matter which relates to technology and/or production activities; and
- the potential for incorporation as a joint stock company.
In addition, in both cases crowdfunding platforms must be provided with certain information forms and subscription agreements must be concluded so that the company or project can be accepted by the platform.
Fintech projects and companies may thus be funded through equity-based crowdfunding where they fulfil the conditions set forth above. However, as the regulation is very new, no such crowdfunding platforms have yet been established and no equity-based crowdfunding activities have as yet taken place.
Until very recently, lending-based crowdfunding on the Turkish market was strictly forbidden, as under the banking legislation it is not possible for someone to provide money in return for consideration such as interest without authorisation from the relevant authorities. In this regard, peer-to-peer lending was not permitted. However, with the enactment and announcement of Law 7222 on 25 February 2020, peer-to-peer lending via crowdfunding platforms has been recognised under Turkish law for the first time. Lending-based crowdfunding activities may now be carried out by way of peer-to-peer lending and the banking legislation will not apply to such activities.
Given that lending-based crowdfunding has only just been recognised under Turkish law, there is a need for secondary legislation in order to clarify the application of the new legislation.
Other forms of crowdfunding (ie, reward-based or donation-based) are not regulated under Turkish law.
As it is not prohibited, reward-based crowdfunding is currently taking place through certain platforms. However, the investors and companies funding the projects cannot be given company shares or monetary consideration, but only a reward with moral value or a discount on the purchase of the funded product. As a result, the volume of reward-based crowdfunding is not high.
Donation-based crowdfunding is a controversial issue under Turkish law, as it may contravene Law 2860 on Aid Collection and the relevant communiqués; thus, it is not very common.
(b) Online lending and other forms of alternative finance
Venture capital investment and angel investment are established alternative finance methods available in Turkey. In addition, as a result of the enactment of Law 7222 on 25 February 2020, the provision of project finance by project finance funds for long-term investment in capital-intensive sectors, such as technology and energy, has become another alternative finance method.
(c) Payment services (including marketplaces that route payments from customers to suppliers (eg, Uber and AirBnb)
As such marketplaces may provide services in a diverse manner, a diverse range of laws will apply to them. In this regard, in addition to the laws discussed in question 1.1, the following laws may be applicable:
- Law 6502 on Consumer Protection;
- Law 6563 on Electronic Commerce;
- Law 5809 on Electronic Communications;
- the Turkish Penal Code (Law 5237); and
- Law 5651 on the Regulation of Publications in the Internet Environment and Combating Crimes through these Publications.
As per the Communiqué on Principles Regarding Investment Services and Activities and Ancillary Services, institutions providing forex services and forex transactions must fulfil certain conditions – such as minimum capital requirements – and are subject to the authorisation and supervision of the Capital Markets Board of Turkey (CMB). In this regard, fintech companies that meet such conditions and wish to carry out forex activities by themselves on the Turkish markets must apply to the CMB for a licence.
As per the Capital Markets Law and relevant secondary legislation of the Istanbul Stock Exchange, trading companies must fulfil certain conditions and are subject to the authorisation and supervision of CMB. In this regard, fintech companies that meet such conditions and wish to carry out trading activities by themselves on the Turkish markets must apply to the CMB for a licence.
(f) Investment and asset management
There are no fintech-specific regulations applicable to investment and asset management under Turkish law.
(g) Risk management
There are no fintech-specific regulations applicable to risk management under Turkish law.
There are no specific regulations applicable to roboadvice companies under Turkish law. However, roboadvice companies may be subject to the relevant laws and may apply for authorisation to conduct activities if they intend to provide advice within regulated fields.
There are no specific regulations applicable to insurtech companies under Turkish law. In this regard, like ordinary insurance companies, insurtech companies are obliged to comply with the insurance legislation, including:
- Law 5684 on Insurance;
- Law 5510 on Social Security and General Health Insurance;
- Law 6305 on Natural Disaster Insurance; and
- Law 6502 on Consumer Protection.