In a significant regulatory shakeup for the Turkish crypto market, the Capital Markets Board (CMB) has unveiled a sweeping set of new rules governing the operations of cryptocurrency exchanges in the country.

The changes, outlined in a bulletin released by the CMB, aim to provide stronger protections for investors while reining in specific industry standard practices.

One of the most significant new measures is a ban on cryptocurrency exchanges conducting "reference campaigns," which typically refer

to incentive programs that reward users for referring new customers to the platform. Leveraged trading will also no longer be permitted on these exchanges.

Additionally, the CMB has prohibited listing "baskets" that bundle together various asset classes, including cryptocurrencies. This suggests the regulator wants to keep digital assets siloed from more traditional financial products.

Custody and Transactions

Arguably, the most impactful shift is in how customer funds are handled. Going forward, crypto exchanges will be prohibited from directly receiving or delivering customer money. All deposits and withdrawals must now be routed through banks or other authorized financial institutions.

Similarly, customer orders can only be accepted through the exchange's website, mobile app, or platform infrastructure. Orders from social media channels like WhatsApp or Telegram will no longer be allowed.

The new rules also emphasize that non-fungible tokens (NFTs) and gaming tokens are not subject to the Capital Markets Law. This means platforms trading these types of crypto assets will not have to comply with the same regulations as traditional digital asset exchanges.

However, these platforms must inform customers that NFTs and gaming tokens are outside the law's scope and confirm that customers understand this distinction.

Peer-to-Peer and Unlicensed Activities

Another significant change is the crackdown on peer-to-peer (P2P) crypto trading. The CMB has stated that any commercial or professional P2P transactions will be considered unauthorized crypto asset service provider activity, and these operations must be terminated by November 8, 2024.

The regulator has also prohibited the trading, transfer, or other activities involving cryptocurrencies at locations resembling foreign exchange offices unless the participants have explicit permission from the CMB.

Additionally, the issuance of capital market instruments as crypto assets and listing such products on crypto platforms will not be allowed until the CMB provides further guidance.

Advertising and Promotions

Crypto exchanges will now face heightened scrutiny over their advertising and promotional activities. Ads must not contain misleading or false information, and platforms cannot offer customers an "absolute return guarantee."

More significantly, the new rules ban exchanges from organizing promotional campaigns that promise an inevitable return or encourage direct investment in specific cryptocurrencies. Existing referral programs must also be terminated within 15 days.

System Integration

Finally, the CMB has mandated that all crypto platforms integrate their systems with the Central Registry Agency (CRA) under the regulator's technical requirements. The CRA will determine the timeline for this integration process.

These sweeping changes reflect Turkey's determination to bring more excellent order and oversight to its rapidly evolving cryptocurrency market. While some measures may be welcomed by investors seeking more protections, the crackdown on certain standard industry practices could dampen innovation and adoption.