This week, fresh regulations were introduced by Turkey’s Ministry of Treasury and Finance aimed at combating financial crimes associated with cryptocurrency transactions. Users are now required to provide a transfer note consisting of a minimum of 20 characters to clarify the purpose behind their fund transfers.
In tandem with this requirement, trading platforms must gather substantial evidence of the source of funds. These measures come in response to a marked increase in cryptocurrency adoption in Turkey, largely fueled by soaring inflation and a faltering lira.
Implementation of New Transfer Regulations
The Treasury and Finance Ministry has mandated that every digital currency transfer must include an explanatory note of at least 20 characters. Users are obligated to specify the reason for their transactions. Crypto Asset Service Providers (CASPs) will be required to request documentation to demonstrate the origin of the funds. This initiative aims to hinder illicit actors from obscuring their illegal proceeds through high volumes of transactions.
Withdrawal Procedures Designed to Deter Criminal Activity
According to official reports, new guidelines stipulate a waiting period of 72 hours for first-time withdrawals. Following that, withdrawals that do not comply with the FATF’s “travel rule” will be subjected to an additional 48-hour delay. The intention behind this stipulation is to provide authorities with a chance to investigate the legitimacy of funds, particularly to verify if they originate from illegal activities such as online gambling or fraud.
Regulating Stablecoin Transactions
Regulatory bodies will establish limits on stablecoin transfers, capping them at $3,000 per day and $50,000 per month. Platforms adhering strictly to travel-rule compliance can elevate their user limits to $6,000 daily and $100,000 monthly. This tiered regulatory framework incentivizes exchanges toward enhanced compliance while still considering the needs of smaller traders.
Moreover, market participants engaged in liquidity provision, cross-market arbitrage, or market making may be exempted from some stringent checks by proving their funds are legitimate. To qualify for this exemption, they must operate through licensed platforms and furnish appropriate documentation, acknowledging that such professional traders contribute significantly to market stability.
Consequences for Non-Compliance
Minister of Treasury and Finance, Mehmet Şimşek, has emphasized that any CASP failing to adhere to the new stipulations may incur substantial fines, face denial of licenses, or even have their licenses revoked. Platforms will be required to bolster their Know Your Customer (KYC) protocols and implement new software systems to ensure compliance with note-tagging procedures and the verification of fund sources. This could potentially strain smaller firms due to additional financial burdens.
A Delicate Balance for the Future of Cryptocurrency
Turkey boasts one of the highest rates of cryptocurrency adoption globally. Policymakers are keen to foster growth in this sector, asserting that these regulations will safeguard legitimate users while making it increasingly challenging for criminals to utilize the market for illegal activities.
As these rules come into force, domestic exchanges are racing to implement system updates. While traders may express frustration over the impending increase in administrative requirements and wait times, many hold the belief that these enhanced checks will ultimately foster greater confidence among institutional investors and major players in the market.
Featured image credit: Chainalysis, with a chart from TradingView
