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Turkey adds crypto firms to money laundering, terror financing rules

By Xinhua
May 02, 2021

By Monitoring Desk

ISTANBUL: Turkey added cryptocurrency trading platforms to the list of firms covered by anti-money laundering and terrorism financing regulation, it said in a presidential decree published early on Saturday.

The Official Gazette said the country's latest expansion of rules governing cryptocurrency transactions would take immediate effect and cover "crypto asset service providers", which would be liable to the existing regulations.

The move came after a ban on using cryptocurrencies for making payments, which was introduced in response to claims that such transactions are too risky, took effect in Turkey on Friday.

The presidential decree makes crypto asset service providers responsible for seeing their assets are not used illegally. The decree immediately went into force with its publication in Turkey’s Official Gazette.

Last month Turkey's central bank banned the use of crypto assets for payments on the grounds such transactions were risky. In the days that followed two Turkey-based cryptocurrency trading platforms were halted under separate investigations.

The probe into one of them, Thodex, led to the jailing on Thursday of six suspects including the siblings of its chief executive, Faruk Fatih Ozer, who Turkish authorities are seeking after he travelled to Albania.

The investigation into Thodex, which handled daily trades of hundreds of millions of dollars, initially led to the arrests of 83 people after customers complained of not being able to access their funds. Interpol issued a detention warrant for the firm’s CEO on Turkey’s behalf.

Turkish government has sought to impose measures to regulate the booming cryptocurrency market after two major exchanges collapsed in Turkey, which had dealt a blow to hundreds of thousands of investors.

The founder of the company has fled to Albania, according to Ankara, allegedly with $2 billion from investors' assets.

Interpol issued a red notice for the fugitive after a request by Ankara, while dozens of suspects were nabbed in a countrywide police operation.

Three days later, another cryptocurrency exchange Vebitcoin said it had ceased all activities after facing financial strain.

Turkish police detained its main executive and seven other people as part of a broader fraud investigation.

Turks have been increasingly attracted by cryptocurrencies as protection against the decline of the lira and double-digit inflation.

The cryptocurrency market grows exponentially in Turkey, with an estimated 5 million active investors.

Experts say the collapse of the two trading platforms reflects weak regulations of the industry.

"This is a Ponzi scheme, some form of fraud network, offering the dream of getting rich easily by luring people through

tempting promotional advertisements," Baki Demirel, associate professor at the economy department of Yalova University, told Xinhua.

"People move towards the unregulated market in a bid to evade taxes and make a fortune," Demirel said, highlighting the need to bring some regulation to the market.

"There has to be clear rules and transparency to prevent manipulations, and licences should be attributed to people who want to create new platforms," Demirel stressed.

Given the damage and transaction risks, Turkey announced a decree on April 16 that it would ban the use of crypto assets in payments for goods and services, which went into effect on April 30.

Meanwhile, the government was also reportedly mulling over a series of measures to prevent new frauds.

Turkey's Central Bank Governor Sahap Kavcioglu said the Treasury and Finance Ministry is working on wider regulations regarding cryptocurrencies, adding that the bank does not intend to ban them.

Demirel called on international cooperation in fighting against crypto frauds. "Turkey is not the only country afflicted by this issue, which prevails over many other countries. Without a global regulatory system, fighting against crypto frauds will be difficult," he said.