Written by: Nikolai Kuznetsov
Compiled by: TaxDAO
The licensing of cryptocurrencies in any particular jurisdiction can be granted or revoked at the discretion of the government or national leader. The Turkish government recently announced a series of new cryptocurrency regulations, but the road to achieving this goal is not smooth. For years, the Turkish government has resisted formal digital asset regulation, with President Recep Erdoğan declaring in 2021 that the country was "at war with cryptocurrencies" and banning their use for payments.
At the time, the government's view appeared to be that cryptocurrencies posed a competitive threat to the future development of the digital lira. However, many Turkish citizens held a different perspective. A KuCoin survey in September 2023 found that 52% of Turks had already adopted cryptocurrencies, while Chainaanalysis' 2023 Cryptocurrency Geography Report showed that Turkey ranked fourth globally in cryptocurrency trading volume, behind only the US, UK, and India. In both cases, the interest in cryptocurrencies was attributed to Turkey's high inflation (over 60% in 2023) and the lira's weakness. In September 2023, the Turkish lira became the largest cryptocurrency trading pair on Binance, accounting for 75% of all fiat currency trading volume at the beginning of the month.
Why is regulation necessary? And why now?
Even considering the high level of public interest in cryptocurrencies, the dramatic shift in government policy toward regulation is unlikely to be purely driven by citizens' desire for access to digital assets. One possible explanation is that Erdogan, having defeated his political opponent Kemal Kilicdaroglu in last May's presidential election, may be exercising his legislative power. In contrast to Erdogan's anti-crypto stance, Kilicdaroglu was marketed as a Web3 supporter, making election promises including expanding the Web3 platform. Therefore, the new rules could be a way for Erdogan to demonstrate his ability to control the growing interest in digital assets.
However, more pragmatic factors are likely at play. In announcing the new regulations, Finance Minister Mehmet Şimşek mentioned the country's goal of being removed from the Financial Action Task Force's "grey list," which highlights countries that have failed to take appropriate measures to combat money laundering and terrorist financing. After meeting 39 of the 40 requirements, the crypto legislation is the final check Turkey needs to complete to be removed from the list. The government's new rules focus primarily on licensing and taxation, and implement measures such as minimum capital requirements similar to the EU's MiCA regulations.
surging interest
There was a time when the prospect of regulation in the digital asset space could force operators to close down. However, the situation now seems to be quite the opposite, and this can only be seen as a sign of increasing maturity. Many believe that the implementation of MiCA in the EU has played a positive role in promoting the adoption and acceptance of digital assets, and now the same seems to be happening in Türkiye.
Within weeks of the regulatory announcement, two major banks launched cryptocurrency-related initiatives. Akbank announced its acquisition of local cryptocurrency company Stablex, while Garanti BBVA has now launched a cryptocurrency wallet.
However, Turkey has recently seen an explosion in Web3 activity due to the surging demand from its young and rapidly growing user base. The EOS Network Foundation (ENF) is one of the latest to join this trend, announcing a partnership with global cryptocurrency exchange CoinTR to establish a Web3 industry lab in Türkiye.
In a speech delivered in Istanbul to representatives from the government and financial sectors, ENF Founder and CEO Yves La Rose highlighted Turkey's potential to become a global leader in grassroots adoption. La Rose stated, "Turkey presents a unique combination: high cryptocurrency adoption rates, an environment shaped by economic factors favorable to digital currencies, and a rapidly growing market with a strong passion for blockchain innovation. The biggest opportunities will revolve around stablecoins and TradeFi's ability to adopt them and integrate them into daily operations, driving growth and demand for the Turkish lira globally, thereby curbing its hyperinflation. This has already occurred with the government's CBDC pilot program and the strong interest shown by Turkish banks in blockchain integration."
Multi-chain project Serenity Shield recently announced a strategic expansion into Turkey and the Middle East and North Africa, thanks to an investment from Castrum Capital, one of Turkey's largest AI venture capital firms. Beyond geographical expansion, this collaboration will also further integrate AI into Serenity Shield's StrongBox, a solution for secure and confidential data storage and digital asset inheritance.
A gathering of heroes
Bitget Wallet is another Web3 company joining the Middle East bandwagon, announcing its expansion plans in Turkey at the week-long Devconnect conference in Istanbul in November. It will focus on developing partnerships with local projects and stakeholders to provide localized Web3 services to the Turkish market. A spokesperson also confirmed that the project plans to integrate the Bitget wallet into use cases, "including GameFi and SocialFi for transaction execution and hedging."
Devconnect was just one of many cryptocurrency-centric events held in Turkey last year, further highlighting the country's status as a hub for grassroots developers and the startup community. In addition to events attracting Ethereum developers, Istanbul also hosted Istanbul Blockchain Week in August, focusing on Islamic financial solutions. In November, Binance's newly promoted CEO, Richard Teng, flew to Turkey to launch Binance Blockchain Week, while Vitalik Buterin was a star attendee at the "zkDay" event held that same month.
Therefore, if one hoped that regulatory announcements would create barriers and act as a deterrent, the reality seems to be quite the opposite. After operating under a cloud of regulatory uncertainty for years, Web3 innovators see this change as an opportunity to build a stable foundation through the certainty that comes with regulatory clarity. Now, Turkey appears poised to offer a system comparable to its EU neighbors and is poised to further develop into a "birthplace" of the Web3 space.
