Pursuant to Article 35/B of the Capital Markets Law No. 6362 (the "Law"), the Capital Markets Board (the "Board") is authorized to determine the principles and guidelines concerning the establishment, shareholders, managers, and capital of crypto-asset service providers (the "Platforms"). Accordingly, the Board's announcement emphasized that Platforms must demonstrate robust corporate structures, the financial capability of investing in their IT infrastructure, and the financial strength to manage potential risks. It has also established certain principles and guidelines for the establishment of Platforms to mitigate the negative impacts of institutions not meeting these criteria.
The Board has stipulated the following conditions for the authorization of the establishment of Platforms:
- Must be established as a joint-stock company.
- All shares must be registered.
- Shares must be issued in exchange for cash.
- Minimum capital of 50,000,000 Turkish Lira to be fully paid in cash (equity capital must not be less than this amount).
- Articles of association must comply with the provisions of Law and related regulations.
- Platform founders must meet requirements specified by the Law and relevant regulations.
- Platform trade names must include the phrase "crypto-asset trading platform" to identify the services provided.
- Articles of association must specify that Platforms' field of activity is exclusively limited to one or more of crypto-asset trading, initial sale or distribution, exchange, settlement, transfer and custody services required by these activities,
- The board of directors must consist of at least three members.
- The shareholding structure must be transparent and clear.
The minimum capital limit of TL 50,000,000 may be increased under regulations to be issued regarding operating principles.
The Board has also imposed certain requirements for founders, shareholders and managers:
Founders and shareholders of the platforms must:
- Have not been declared bankrupt, requested a concordat, or been subject to a decision for postponement bankruptcy.
- Not hold, directly or indirectly, 10% or more of the shares or control in financial institutions that are under liquidation (such as bankers, factoring companies, insurance companies, etc).
- Have not been convicted of crimes such as disgrace, smuggling, financing of terrorism or have received a prison sentence of five years or more for an intentional crime.
- Not be subject to transaction prohibition pursuant to Article 101/1-a of the Law,
- Possess the required financial strength, integrity and reputation, and
- Not be among the individuals responsible for institutions whose operating licenses have been revoked.
Conditions for Natural Person and Legal Entity Shareholders
Natural persons enjoying the right to receive more than half of distributable profits or to elect/nominate more than half of the directors of the board, as well as the founding shareholders of the Platforms' legal entity, must meet the conditions mentioned above if they hold shares representing, directly or indirectly, 10% or more of the capital or voting rights (or if they have privileged shares less than 10% which nevertheeless grant the right to be represented on the board of directors).
Conditions to be Applied in the Event of a Change in Post- Establishment Shareholder Structure
In the event that the shareholding structure changes after establishment, the legal entity shareholders holding shares, directly or indirectly, representing 10% or more of the Platform's capital or voting rights, and privileged shares under 10% which nevertheless grant the right to be represented on the board of directors, and shareholders holding shares directly or indirectly representing 10% or more of the capital or voting rights, and privileged shares under 10% which nevertheless grant the right to be represented on the board of directors, must also meet the above conditions.
Rules Regarding Share Transfer
Aforementioned individuals or legal entity shareholders who fail to meet the abovementioned requirements, except for the clause stating that they must have the "required financial strength, integrity, and reputation," they are required to transfer their shares to individuals or entities who meet these requirements within 6 months. During this period, the Board will determine by whom and how voting rights associated with the shares to be transferred will be exercised.
Requirements for Managers
Managers are members of the board of directors, the general manager, the deputy general manager and personnel who, regardless of title, exercise equivalent powers or duties to the general manager and deputy general manager or are authorized to represent the Platform.
Said managers must meet the conditions foreseen for shareholders except for the clause requiring "required financial strength, integrity and reputation". In addition, the majority of members of the board of directors must be graduates of 4-year bachelor's degree programs.
For the establishment of Platforms, the founders are required to apply to the Board with articles of association that meet the conditions for establishment; documents demonstrating they and their managers meet the mandatory conditions; and the documents and forms in Annex 1 and Annex 2. The Board may request additional information and documents if deemed necessary. Compliance with the regulations related to the establishment as set forth by the Law is also required. Companies that have obtained authorization for establishment must subsequently apply to the Board again to obtain an operating license in accordance with principles and guidelines to be determined by the Board.
Transition and Compliance:
- Within the scope of Provisional Article 11 of the Law, Platforms that were "engaged in crypto asset service provision activities at the time the Law came into effect" are companies that, as of the date of application to the Board, have existing customers and/or custodial balances belonging to customers. In this context, companies which declared they were operational as per the announcement dated 02.07.2024, but had no customers and/or custodial customer balances at time of application, have had their applications dismissed.
- In applications made to the Board, those who did not submit the Annex-2 Form specified in the announcement dated 02.07.2024, or who provided incomplete or insufficient information and documents requested under items (3) and (4) of the document list in Annex-1, will have their applications dismissed. If other documents are missing, companies may still be added to the "List of Operating Companies" if they rectify applicable errors and submit to the Board within 15 business days from the date of the request (otherwise their applications will be dismissed).
- Applications not processed or dismissed due to failure to meet establishment and managerial conditions cannot engage in activities defined by the Law following the Board's notification date but may reapply after fulfilling the specified conditions.
- Companies listed or to be listed in the "List of Operating Companies" prepared in accordance with the announcement dated 02.07.2024 must apply to the Board by the end of business on 8 November 2024 by meeting the conditions specified in this Principle Decision. These companies may continue their operations until the Board's regulations regarding operating conditions come into effect in accordance with Provisional Article 11 of the Law.
- In the event of non-compliance with the above regulations, the provisions regarding unauthorized crypto asset service provision activities under Articles 99/A and 109/A of the Law may be applied.
To access Annex 1 and Annex 2:
https://spk.gov.tr/data/66b51e688f95db021892940c/2024-38.pdf
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
