Turkey: Latest Turkish Fintech Developments

2021: Off To A "Fast" Start

The Communiqué No. 2020/4 on the Procedures and Principles Regarding Fees Banks Can Charge Corporate Clients ("Fee Communiqué") was amended via the Official Gazette dated December 31, 2020. The amendment reflects the fees that banks can charge for banking transactions made via Instant and Continuous Transfer System of Funds (Fonlarin Anlik ve Sürekli Transferi Sistemi) ("FAST"), which the Central Bank of Turkey introduced in November 2020. The amendments to the Fee Communiqué aim to establish a legal infrastructure for the use of FAST and expand fast banking.

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Branchless Banking Finally in Turkey

The Regulation on Remote Identification Methods to be used by Banks and the Establishment of Contractual Relationships in Electronic Media ("Remote IT Regulation") was published in the Official Gazette on April 1, 2021. The Remote IT Regulation entered into force on May 1, 2021. The Regulation sets out the terms relating to the remote identification methods that Turkish banks can use for the acquisition of new clients and client identity verification, together with the responsibility arising from these transactions. The Remote IT Regulation also oversees the establishment of contractual relationships in electronic media following remote identification. The Remote IT Regulation creates an environment where clients can complete their banking transactions remotely instead of going to a bank branch physically. These recent developments not only serve to decrease the burden of branch operations, but also signal that technological improvements in data verification and confirmation will have an increasing impact on the banking sector.

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2-in-1 Crowdfunding: Debt-Based and Share-Based Crowdfunding Regulated under One Single Communiqué

The Capital Markets Board's ("CMB") Communiqué No. III.-35/A.2. on Crowdfunding ("CF Communiqué") entered into force upon its publication in the Official Gazette dated October 27, 2021, abolishing the previously issued Share-Based Crowdfunding Communiqué. The CF Communiqué regulates the principles of the long-awaited debt-based crowdfunding and also introduces certain amendments in response to issues regarding share-based crowdfunding that arise from market practices, as previously discussed in our Legal Alert dated August 31, 2021. The CF Communiqué regulates that all crowdfunding platforms must be CMB licensed. Additionally, the CF Communiqué stipulates the framework of platform activities, investment limits, fundraising and use of fund proceeds including share-based and debt-based crowdfunding and the criteria to be fulfilled by fund raisers. The long-awaited principles of debt-based crowdfunding and share-based crowdfunding are consolidated.

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Establishment of Courts that Specialize in Cybercrimes and Financial Crimes

The Judges and Prosecutors Council ("Council") issued a decision on the establishment of new specialized courts for cybercrimes and financial crimes. The decision was published in the Official Gazette on November 30, 2021 and became effective as of December 15, 2021. Due to the increasing number of disputes in the fields of financial technologies (fintech) and information systems, the Council has established specialized courts in view of the workload and the nature of the disputes in these fields.

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Secondary Legislation on Payment Services Re-Envisioned

The Regulation on Payment Services and Electronic Money Issuance and Payment Service Providers ("Payment Services Regulation") and the Communiqué on Information Systems of Payment and Electronic Money Institutions and Data Sharing Services in Payment Services ("Payment Services Communiqué") issued by the Central Bank of the Republic of Turkey were published in the Official Gazette on December 1, 2021 and entered into force on the same date. The Payment Services Regulation and the Payment Services Communiqué bring important changes and innovations to the payment systems legislation, including but not limited to the concept of e-money, anonymous pre-paid instruments, payment service infrastructure services, and cooperation with international peers. In this context, the establishment of contracts with remote communication tools and crypto assets were incorporated into the payment systems legislation and provided a clarified legal basis for partnerships of international payment services providers with their Turkish peers.

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24/12/2021

Effective Date of the Regulation for Disclosure of Confidential Information Postponed

The Regulation for Disclosure of Confidential Information ("Confidential Information Regulation") was published in the Official Gazette No. 31501 dated June 4, 2021. The effective date of the Confidential Information Regulation was previously set as January 1, 2022. However, pursuant to the Regulation Amending the Regulation for Disclosure of Confidential Information, which was published in the Official Gazette No. 31699 dated December 24, 2021, the effective date of the Confidential Information Regulation is now changed to July 1, 2022.

The Confidential Information Regulation stipulates Turkish banks' confidentiality obligations and the exceptions thereto, and sets forth the principles of the sharing and disclosure of confidential information deemed secret under the Banking Law No. 5411. You can read more about this in our Legal Alert dated June 7, 2021.

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Revolution is Here: Branchless (Digital) Banking Regulation Published in the Official Gazette!

The Regulation on the Operation Principles of Digital Banks and Service Model Banking ("Digital Banking Regulation") determining the principles of branchless banking and service banking was published in the Official Gazette on December 29, 2021 and entered into force on January 1, 2022. The Digital Banking Regulation enables banks to provide services only through digital channels without any physical branches; set forth the operational principles for branchless banks; and stipulated principles for service model banking such as incorporation / operation permit requirements, client portfolio, operation limitations and Banking Regulatory and Supervisory Authority supervision and service continuity undertaking. The Digital Banking Regulation sets out the principles applicable to the long-awaited concept of branchless banking, and introduces the service banking model, which enables financial technology companies to present financial products and services utilizing the infrastructure of conventional banks.

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Crypto Law on the Way

A draft bill ("Draft Bill") that aims to set the legal framework regarding crypto assets by amending the Capital Markets Law ("CML") has been presented to the Grand National Assembly of Turkey. In the Draft Bill, the concepts of crypto wallet, crypto asset, crypto asset trading platform ("Platform"), crypto asset custody service and crypto asset service provider are defined for general purposes in Turkish laws for the first time. In addition, the principles for crypto asset trading transactions, crypto asset service providers and Platform customers together with the CMB supervision on crypto asset service providers are regulated in the Draft Bill. While the Draft Bill regulates crypto assets within the CML, it does not qualify

crypto assets as "capital markets instruments." Accordingly, crypto assets will be subject to a legal regime different from that of capital markets instruments. A "closed loop" approach is explicitly adopted under the Draft Bill to track crypto trading by banning the trade in offshore markets without the supervision of the CMB, by virtue of imposing administrative and judicial sanctions.

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