Establishment of a Company to Operate in the Cryptocurrency Field

Certain conditions are required for the establishment of a company that will operate in the field of Cryptocurrency. In this case, we will present you the list of conditions and required documents in the light of the latest updates. First of all, the capital is 50.000.000 TL. Some banks also request a criminal record as an additional document.

In other words, when the law comes out, a person who has been involved in financial crimes before will not be able to open a cryptocurrency exchange anyway, so banks have already started this practice.

According to the law, the establishment and activities of crypto asset service providers are subject to the permission of the Capital Markets Board (CMB), and imprisonment is imposed for those who work without permission.

Existing crypto asset service providers must apply to the CMB and obtain an operating license within 1 month from the effective date of the law.

The audit of crypto asset platforms will be carried out by independent audit institutions included in the list announced by the CMB.

Real persons and officials of legal entities found to be working as a crypto asset provider without permission will be sentenced to imprisonment from 3 years to 5 years and a judicial fine from 5 thousand days to 10 thousand days.

According to the legislation, in order for crypto exchanges to apply, they must have a joint stock partnership structure, issue all of their shares in cash, be established with a capital of at least 50 million TL, their founders must not be bankrupt and the board of directors must consist of at least three members. The application will be financially evaluated by the CMB and the electronic infrastructure of the Exchange will be audited by Tübitak. The CMB update is as follows;

(1) It is mandatory to obtain permission from the Board for the establishment and commencement of operations of crypto asset service providers, and they shall exclusively perform activities to be determined by the Board. Principles regarding their establishment and commencement of operations, shareholders, managers, personnel, organization, capital and capital adequacy, liabilities, information systems and technological infrastructure, share transfers, activities they may carry out, temporary or permanent suspension of their activities, and other principles and guidelines that they must comply with during their activities shall be determined by the Board. It is obligatory to obtain the permission of the Board for share transfers. Transfers made in violation of the regulations made pursuant to this paragraph shall not be registered in the share ledger, and the registrations made in the share ledger in violation of this provision shall be null and void.

(2) Crypto asset service providers are obliged to make the necessary arrangements, take the necessary measures and establish the necessary internal control units and systems for the secure management of their systems. In order for the Board to authorize the establishment and/or commencement of operations of cryptoasset service providers, compliance with the criteria to be determined by TUBITAK in terms of information systems and technological infrastructures shall be sought.

(3) a) The shareholders of crypto asset service providers; 1) are not bankrupt according to the provisions of Law No. 2004 or other legislation, have not declared concordat, have not declared concordat, have not approved the restructuring application by reconciliation or have not been given a decision to postpone bankruptcy, 2) Not directly or indirectly owning or controlling ten percent or more shares in factoring, financial leasing, financing, savings finance, asset management, insurance, reinsurance, pension companies and payment system operators, payment service providers and institutions operating in money and capital markets whose operating licenses have been revoked except for bankers subject to liquidation and voluntary liquidation, 3) Simple or qualified embezzlement, embezzlement, embezzlement, extortion, bribery, theft, fraud, forgery, abuse of trust in accordance with the repealed Turkish Penal Code dated 1/3/1926 and numbered 765, Turkish Penal Code dated 26/9/2004 and numbered 5237, or other laws, even if they have been pardoned, except for negligent offenses, From disgraceful crimes such as fraudulent bankruptcy and smuggling crimes other than smuggling of use and consumption, official procurement and purchase and sale rigging, rigging the performance of the performance, blocking, disrupting, destroying or changing the information system, misuse of bank or credit cards, laundering of assets derived from crime, financing of terrorism and crimes listed in Article 5 of the Law on Prevention of Financing the Proliferation of Weapons of Mass Destruction dated 27/12/2020 and numbered 7262 or crimes against the person of the State, crimes against the signs of sovereignty and the dignity of its organs, crimes against the security of the State, crimes against the constitutional order and the functioning of this order and national defense, Not being convicted of the crime of revealing state secrets, crimes against state secrets and espionage, crimes against relations with foreign states, crimes within the scope of the Anti-Terrorism Law dated 12/4/1991 and numbered 3713, crimes of tax evasion or participation in these crimes, not being sentenced to imprisonment for a period of five years or more for a crime committed deliberately, or not having a finalized conviction for crimes written in this Law, 4) Not being prohibited from transactions pursuant to subparagraph (a) of the first paragraph of Article 101 of the Law, 5) Having the necessary financial strength and the honesty and reputation required by the job, 6) b) Members of the board of directors and persons authorized to represent the crypto asset service provider without being a member of the board of directors must meet the conditions stipulated for shareholders, except for the financial strength condition in subparagraph (a) of this paragraph. c) Real persons who have the right to receive more than half of the distributable profit of the crypto asset service provider on their own or who have the right to be represented in the board of directors by electing or nominating more than half of the members in accordance with the articles of association of the company must meet the conditions in subparagraph (a). ç) Shareholders holding shares directly or indirectly representing ten percent or more of the capital or voting rights of the legal entity founding shareholders of the crypto asset service provider, and shareholders holding privileged shares that give them the right to be represented in the board of directors, even if below this ratio, must also meet the conditions specified in subparagraph (a). Real and legal person shareholders who directly or indirectly own shares representing ten percent or more of the capital or voting rights of the crypto asset service provider, or privileged shares that give them the right to be represented in the board of directors even if they are below this ratio, and the shareholders mentioned in subparagraph (ç), except for subparagraph (5) of subparagraph (a), in case they lose the qualifications specified in subparagraph (a), are required to transfer their shares to persons who meet the conditions specified in subparagraph (a) within six months. The Board shall determine by whom and how the voting rights corresponding to the shares to be transferred within the said period shall be exercised.

(4) Procedures and principles regarding the trading and sale of crypto-assets through platforms and the initial sale or distribution thereof, and the clearing, transfer and custody of crypto-assets shall be regulated by the Board.

(5) Crypto asset service providers are not subject to other provisions of this Law except for the provisions referred to in this Law. For the matters that are regulated in this Article and Articles 35/C and 99/B, but not clarified, or for which the implementation needs to be guided, the Board is authorized to regulate and guide the implementation by establishing regulatory procedures and taking special decisions within the scope of the second paragraph of Article 128 of this Law. The opinion of the Banking Regulation and Supervision Agency shall be taken for the regulations imposing obligations on banks by the Board pursuant to this article and articles 35/C and 99/B.

(6) The Board is authorized to establish regulatory procedures, take special and general decisions, and impose measures and sanctions with respect to crypto assets that provide rights specific to capital market instruments. The Board may determine principles for the sale or distribution of crypto assets, other than crypto assets that provide rights specific to capital market instruments, created through the development of distributed ledger technology or a similar technological infrastructure, whose value cannot be separated from this technology, on platforms without being subject to the provisions of the Law regarding capital market instruments. In the process of determining the crypto assets that will be subject to these principles, it may request technical reports from TÜBİTAK or other public institutions and organizations affiliated, related, associated institutions and organizations of ministries and other public institutions in order to evaluate them in terms of technical criteria. In this context, deeming the technological characteristics of a cryptoasset appropriate and authorizing their sale or distribution does not constitute a public guarantee. The relations between those who collect money from the public through the sale or distribution of these crypto assets and those who provide funds to them are subject to general provisions. Real persons and legal entities who sign all kinds of information documents prepared and announced in a manner to be determined by the Board during these transactions are jointly and severally liable for the damages arising from false, misleading or incomplete information contained in these documents.

(7) Duties and authorities of institutions and organizations arising from other legislation regarding crypto assets are reserved.

(8) This Law shall not apply to crypto assets other than the crypto assets specified in the sixth paragraph of this Article and the crypto assets traded on platforms within the principles set forth in the second paragraph of Article 35/C.

(9) The provisions of the Law on the Protection of the Value of Turkish Currency dated 20/2/1930 and numbered 1567 and the relevant legislation regarding all kinds of transactions made with crypto assets are reserved.

(10) The Law on Movable Pledge in Commercial Transactions dated 20/10/2016 and numbered 6750 shall not apply to the pledge agreements subject to crypto assets.

In addition

With the amendment made to the Capital Markets Law, a capital requirement was introduced for service providers. With this requirement, it will be ensured that both the investor is protected and a series of sanctions can be imposed on service providers.

The Capital Markets Board (CMB) was authorized for the issuance, sale, clearing and distribution of crypto assets.

From now on, all transfer transactions will be recorded. The CMB will also be authorized to impose measures and sanctions. The Board will be able to determine the contractual terms between service providers and their customers.

The chairman, members and other members of the board of directors of crypto-asset service providers who embezzle assets for themselves or someone else will be sentenced to imprisonment from 8 to 14 years.

In the event that fraudulent behavior is committed in order to prevent the embezzlement from being understood in the crime committed, the perpetrators can be tried with a prison sentence of 14 to 20 years.

With the amendment to the law, market fraud and manipulative actions in the market will be subject to administrative fines between 246 thousand liras and 6 million liras.

Service provider’s debt will not worry the customer

The “capital requirement” introduced with the regulation in the law will make crypto platforms more reliable.

Crypto asset service providers will be required to obtain CMB authorization to be established and start operating.

The cash and crypto assets of customers with crypto asset accounts will not be subject to seizure, pledge or injunction due to the debts of crypto asset service providers.

Finally, to summarize, the procedures to be carried out step by step will be as follows;

1-) The Company Structure will be converted into a Joint Stock Company.

2-) If the number of partners of the company is less than 3, a structure with at least 3 partners will be established.

3-) The required capital (50.000.000 TL) will be deposited into the Company’s Bank Account after consultation with the bank. If this money comes from abroad, it must be specified in the SWIFT description.

4-) Afterwards, the following list of required documents from the partners and the company will be completed and an application for license will be made to the relevant institutions and organizations.

5) Afterwards, the necessary follow-up will be done and in case of rejection, possible solutions and litigation will be taken.

CONDITIONS FOR THE ESTABLISHMENT OF CRYPTOCURRENCY PLATFORMS

1) In order for the establishment of platforms to be authorized by the Board.

a) Establishment as a joint stock company,

b) All of its shares are registered shares,

c) Issuance of shares against cash,

ç) Its minimum capital of TL 50.000.000 shall be fully paid in cash and its shareholders’ equity shall not be less than this amount,

d) Their articles of association are in compliance with the provisions of the Law and the relevant regulations,

e) The founders fulfill the conditions specified in the Law and the relevant regulations,

f) Including the phrase “crypto asset trading platform” in their trade names to indicate the services they will offer,

g) The articles of association stipulate that the subject of business is exclusively the trading, initial sale or distribution of crypto assets, clearing, settlement, transfer and the realization of one or more of the custody transactions required by these transactions,

ğ) The board of directors to consist of a minimum of three members,

h) The shareholding structure must be transparent and open.

B) Conditions regarding founders, shareholders and managers

1) Platform founders and partners.

a) Not to be a bankrupt according to the provisions of the Law No. 2004 or other legislation, not to have declared concordat, not to have approved the restructuring application through reconciliation or not to have been given a decision of postponement of bankruptcy,

b) Not holding, directly or indirectly, ten percent or more shares or controlling more than ten percent or more shares in bankers subject to liquidation and factoring, financial leasing, financing, savings and loan financing, asset management, insurance, reinsurance, pension companies and payment system operators, payment service providers and institutions operating in money and capital markets whose operating licenses have been revoked except for voluntary liquidation,

c) Simple or qualified embezzlement, embezzlement, embezzlement, extortion, bribery, theft, fraud, forgery, abuse of trust in accordance with the abrogated Turkish Penal Code dated 1/3/1926 and numbered 765, the Turkish Penal Code dated 26/9/2004 and numbered 5237 or other laws, even if they have been pardoned, except for crimes of negligence, From disgraceful crimes such as fraudulent bankruptcy and smuggling crimes other than smuggling of use and consumption, official procurement and purchase and sale fraud, bid rigging, bid rigging, blocking, disrupting, destroying or altering the information system, misuse of bank or credit cards, laundering of assets derived from crime, financing of terrorism and crimes listed in Article 5 of the Law on Prevention of Financing the Proliferation of Weapons of Mass Destruction dated 27/12/2020 and numbered 7262 or crimes against the person of the State, crimes against the signs of sovereignty and the dignity of its organs, crimes against the security of the State, crimes against the constitutional order and the functioning of this order and national defense, Not being convicted of the crime of revealing state secrets, crimes against state secrets and espionage, crimes against relations with foreign states, crimes within the scope of the Anti-Terrorism Law dated 12/4/1991 and numbered 3713, crimes of tax evasion or participation in these crimes, not being sentenced to imprisonment for five years or more for a crime committed deliberately, or not having a finalized conviction for the crimes written in this Law,

ç) Not being prohibited from transactions pursuant to subparagraph (a) of the first paragraph of Article 101 of the Law,

d) Having the necessary financial strength and the honesty and reputation required by the job,

e) In organizations, one of the operating licenses of which has been revoked by the Board, he/she must not be one of the persons responsible for the event requiring this sanction.

DOCUMENTS REQUIRED TO BE SUBMITTED BY PLATFORMS WITH THEIR APPLICATION TO OUR BOARD

1) The decision of the authorized body declaring that the conditions required by the Resolution have been met and that an application to the Board has been made,

2) Regarding partners and managers.

a. Criminal record certificate taken within the last 6 months,

b. Identity card sample (Turkish citizens)/passport sample (Foreigners),

c. Diploma sample and curriculum vitae,

3) Your company.

a. The information systems infrastructure it uses,

b. Processes and tools for the protection of customer assets,

c. Processes related to the processing of transactions into the blockchain system,

d. Integrations with other internal and external systems (AML/CFT systems, reporting to public authorities, etc.),

e. Operation and reporting processes and

f. Explanations on the functioning of risk management processes and related documents,

4) Including the following issues regarding the Company’s custody infrastructure.

a. The functioning of the custody system for crypto assets and clients’ cash assets,

b. Whether services are obtained from outside the Company for the custody of crypto assets,

c. Explanations and related documents on which wallet technologies are used to store crypto assets,

5) Organization chart.

Finally, if we answer the questions we discussed and agreed upon in our meeting one by one;

1- In case a cryptocurrency company operates as an agency, whether it still needs to apply for a license

Pursuant to Law No. 7518 “Law Amending the Capital Markets Law” (entered into force on 2.7.2024), crypto asset service providers operating or to operate in Turkey are subject to the regulation and supervision of the Capital Markets Law. Within the scope of the aforementioned regulation, any environment where one or more of the activities of trading, clearing, transfer and custody services required by crypto assets and the custody and management of crypto assets or private keys that provide the right to transfer from the wallet related to these assets are carried out as a regular occupation, commercial or professional activity falls within the scope of this Law, and those who do not fulfill the obligations specified in the Law will be subject to action in accordance with Articles 99/A and 109/A of the Law.

2- How much should the net capital of the company be?

The minimum capital of the organizations (Platform) where one or more of the crypto asset trading, initial sale or distribution, clearing, transfer, custody and other transactions that may be determined is determined as 50.000.000 TL and its equity should not be less than this amount.

3- Will there be any blockage on the capital?

Pursuant to the CMB Principle Decision, the minimum capital of TRY 50,000,000 for platforms must be fully paid in cash and it is explained that this amount can be increased.

4- What are the technical and license processes during the establishment phase?

Some conditions are required, such as being established as a joint stock company, all of its shares must be registered, the members of the board of directors must consist of at least 3 people, and the majority of the members of the board of directors must be graduates of 4-year undergraduate schools.

Organizations wishing to commence operations after the effective date of the Law and before the secondary regulations to be issued by the CMB enter into force (current period) are also obliged to submit to the CMB in writing their declarations in accordance with the first paragraph of Provisional Article 11, together with the information, documents and explanations in https://spk.gov.tr/data/66b51e688f95db021892940c/2024-38.pdf Annex/1 and Annex/2, before commencing their operations.

ANNEX/2 PLATFORM INFORMATION FORM AND DOCUMENTS

5- Does it make any difference whether the shareholder of the company is a Turkish citizen or a foreigner (Russian or Ukrainian citizen)?

In the conditions regarding founders, shareholders and managers section of the CMB Resolution and in the general provisions

There is no provision or restriction on the foreign shareholder of the company

6- Can the persons on the Board of Directors be foreigners?

In the conditions regarding founders, shareholders and managers section of the CMB Resolution and in the general provisions

There is no provision or restriction on foreign board members.

7- How long does the installation time and process take on average? (License application)

Pursuant to Provisional Article 11 of the Capital Markets Law No. 6362, the list (Provisional List) created for the purpose of informing the public about the institutions that have declared that they will operate has been announced in the last two months. https://spk.gov.tr/kurumlar/kripto-varlik-hizmet-saglayicilar

8- Can the company continue to operate during the license application?Existing cryptoasset platforms may continue their activities during the license application phase. Those that have been carrying out cryptoasset service provider activities as of 02.07.2024 and intend to continue to do so must submit their declarations in accordance with the first paragraph of Provisional Article 11 to the CMB in writing until 02.08.2024, together with the information, documents and explanations inAnnex/1 and Annex/2. Institutions wishing to commence operations after the effective date of the Law and before the secondary regulations to be issued by the CMB enter into force are also obliged to submit to the CMB in writing their declarations in accordance with the first paragraph of the Provisional Article 11, together with the information, documents and explanations in Annex/1 and Annex/2, before commencing their operations.