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Turkey Regulating Crypto Assets To Shed “Grey List” Tag

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Turkey is swiftly advancing its efforts to regulate cryptocurrency assets, according to the country’s Finance Minister, Mehmet Şimşek. In his address to the nation’s planning and budget commission on October 31st, Şimşek revealed the government’s determination to formalize crypto assets within the national financial framework. This move comes after the nation found itself on the Financial Action Task Force [FATF] grey list in 2021, subjecting the nation to heightened scrutiny. Being on this list has posed significant challenges for Turkey, hindering its ability to attract foreign investments, especially during a period of existing economic difficulties.

The FATF had criticized Turkey for its failure to implement effective measures to combat money laundering and terrorist financing, resulting in the exploitation of the country’s financial system by various criminal entities, including mafia groups, drug traffickers, organized crime syndicates, and terrorist organizations, over the past decade. A report issued by the global agency in July 2023 highlighted Turkey’s continued strategic deficiencies in meeting the FATF’s recommendations.

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To address these concerns and enhance its anti-money laundering and counter-terrorist financing efforts, Turkey has decided to incorporate digital assets into its tax framework. This decision, outlined in the 2024 Presidential Annual Program, signifies a significant shift in the government’s approach to cryptocurrencies. After years of deliberation, this move is poised to bring about substantial changes in the country’s economic policies.

Turkey Minister Says Crypto Laws On The Final Stages

According to Şimşek, Turkey has successfully adhered to “39 out of 40 FATF standards.” He stated, “Regarding technical compliance, the only ongoing preparations are related to work on crypto assets. Our necessary efforts in this regard have reached the final stage.” He further added, “We will submit a law proposal on crypto-assets to the parliament as soon as possible. After that, there will be no reason for Turkey to remain on the grey list, provided there are no other political considerations.”

This proactive approach by the Turkish government signals its commitment to addressing the challenges posed by unregulated cryptocurrency activities. By integrating digital assets into the tax framework and preparing a comprehensive legislation proposal, Turkey aims to bolster its financial system’s integrity, attract investments, and strengthen its position on the global economic stage.

Cyprus Considers Stricter Crypto Regulations Amid Global Pressure

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In a bid to bolster its reputation as a crypto-friendly destination, Cyprus is contemplating tighter regulations for the burgeoning cryptocurrency industry. The Cyprus Ministry of Finance has proposed significant amendments to the Prevention and Suppression of Money Laundering Law, signaling a shift towards aligning the nation with international anti-money laundering and counter-terrorism financing standards.

According to a recent report by the Cyprus Mail, the Ministry of Finance has submitted its comprehensive amendments package to the Parliamentary Committee on Legal Affairs. This move aims to align with the rigorous guidelines established by the Financial Action Task Force (FATF) and the recommendations outlined in the MONEYVAL report, released in November 2022.

Key among the proposed amendments is the requirement for all crypto service providers to register with the Cyprus Securities and Exchange Commission (CySEC). Non-compliance with these regulations could result in severe penalties, ranging from substantial fines of up to €350,000 to imprisonment for up to five years or a combination of both.

Cyprus Bar Association Concerned About Cross-Border Crypto Rules

The proposed changes have sparked some reservations within the Cyprus Bar Association, particularly concerning the obligation for crypto service providers holding licenses from other European countries to register with CySEC. This provision was included in the amendments at the behest of CySEC itself.

Despite these potential changes, many crypto companies have reported smooth registration processes in the country. In September, the renowned crypto brokerage firm eToro obtained a Crypto Asset Service Provider (CASP) registration from CySEC, following in the footsteps of ByBit, which secured the same license in June.

Notably, Binance, the world’s largest cryptocurrency exchange, withdrew from the Cyprus market in July. This move came as part of Binance’s strategy to focus on larger, more heavily regulated European Union markets amidst increasing regulatory scrutiny.

Cyprus’s contemplation of stricter cryptocurrency regulations highlights the ongoing global trend of governments and regulatory bodies seeking greater control over the digital asset space. As the industry continues to evolve, striking the right balance between fostering innovation and ensuring security remains at the forefront of these discussions. Cyprus’s potential regulatory adjustments testify to the ever-evolving landscape of cryptocurrency regulation on the international stage.

Related Reading: | SEC’s Rhetoric On Crypto Assets Fuel Heated Debates

South Africa’s Crypto Challenges: A Call for Caution

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A disconcerting scenario has unfolded for crypto enthusiasts in South Africa, raising concerns about the country’s susceptibility to money-laundering activities. Cryptocurrency exchanges within the nation have sounded the alarm, revealing how it has become a hotbed for illicit financial practices. Recent developments reveal that US-based crypto companies have initiated stringent measures, causing disruptions in deposits and payments for South African users.

A local source recently reported that Kraken, a prominent cryptocurrency exchange, has suspended the acceptance of deposits from its South African users. This decision was prompted by the exchange’s banking partner adding the nation to its anti-money laundering blacklist. This move aligns with the Financial Action Task Force’s [FATF] decision, which categorized South Africa as requiring “Increased Monitoring” and placed it on the “grey list” in February of the current year.

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South Africa's Crypto Challenges: A Call for Caution 4

Circle, the issuer of USDC [USD Coin], had also taken proactive measures earlier this year by halting fiat payments from South African users. This decision was made in anticipation of potential financial sanctions against the nation. These actions reflect the ripple effect of FATF’s designation, illustrating how regulatory decisions can influence the operations of cryptocurrency entities.

South Africa: Navigating Stormy Waters

Considering these circumstances, Kraken’s cautious approach toward facilitating transactions from South African users is understandable, aiming to avoid any involvement in potential money-laundering schemes, especially those concerning cryptocurrencies. However, these regulatory and technical interventions have cast a shadow on crypto arbitrage, a popular practice in the country.

Although part of a broader global effort to curb money laundering activities, it’s important to recognize that South Africa has experienced instances of high-profile money smugglers utilizing banks and bribes for money laundering, along with notable fraud cases such as the 2021 theft of 70,000 Bitcoins from the Africrypt platform owned by the Cajee brothers and the fraudulent MLM scheme Mirror Trading International Proprietary.

Adding to the landscape, South Africa’s financial market watchdog, the Financial Sector Conduct Authority [FSCA], recently declared that digital asset trading platforms must operate with a license by year’s end. Failure to comply could lead to closure or fines. This dynamic regulatory environment underscores the ongoing efforts to ensure transparency and accountability within the cryptocurrency realm.

Crypto Leadership: India’s G20 Presidency Championing Global Framework

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At the helm of the Group of Twenty (G20) presidency, India has displayed unwavering support for the Financial Stability Board’s (FSB) recommendations to establish a comprehensive global framework for the burgeoning crypto asset landscape. This resolute stance comes as the nation underscores the urgent need to tackle the potential pitfalls of digital assets, particularly for emerging economies.

India’s Crypto Presidency Note

In a significant move on August 1, India unveiled its presidency note, which serves as a pivotal input into shaping a worldwide roadmap for cryptocurrencies. This landmark document seamlessly aligns with the guidelines issued by prominent international entities, including the Financial Action Task Force (FATF), the International Monetary Fund (IMF), and of course, the FSB.

The presidency note underscores the G20’s commitment to charting a unified path forward for crypto assets, engaging a myriad of organizations and facets currently embroiled in the domain. 

Recognizing the gaps in existing frameworks, the note shines a spotlight on the paramount importance of considering macro-financial implications and integrating the perspectives of Economies in the Membership of the Development Committee (EMDEs). 

The goal is to channel resources effectively, evading redundancy across organizations. Significantly, the note positions itself as a pivotal contributor to the upcoming IMF-FSB Synthesis Paper. 

This landmark paper is slated to furnish a comprehensive roadmap to construct a global framework for crypto assets. With substantial groundwork already completed in framing essential regulatory standards for the crypto industry, the G20’s guidance has steered the discourse in this pivotal sphere. 

International Organizations (IOs) and standard-setting bodies (SSBs) have embraced the G20’s lead, expounding their work through a series of expert reports, standards, and recommendations, dissecting multifaceted aspects of crypto assets in consonance with their distinct mandates.

To buttress the journey towards a comprehensive regulatory framework, the FSB and SSBs have set forth a collaborative work plan spanning 2023 and beyond. The intent is to collectively champion the development and enforcement of a holistic global regulatory framework calibrated to counterbalance the potential risks posed by crypto assets on a global scale. 

The International Monetary Fund (IMF) complements this with macro-financial insights, aiming to forestall policy arbitrage through enhanced global cooperation. This long-anticipated Synthesis Paper, anticipated to emerge by the end of August, assumes the role of a comprehensive compendium, encapsulating a broad array of financial system risks, from macro-financial perils to financial stability and integrity risks.

 It will crystallize into a roadmap ready for adoption by the G20, amalgamating the harmonized FSB and SSB work plans on regulatory matters, along with other IO workstreams. The overarching goal remains the establishment of a cohesive, globally-accepted policy standard for crypto assets.

 It strives to fortify macroeconomic resilience, ensure financial stability and integrity, propagate investor/user awareness and safeguards, and nurture the advancement of the underlying technology, encouraging pioneering strides in the financial sector.

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A New Legislation to Regulate Digital Currency Payment Suggested by G20

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A new digital currency payment bill proposed by the G20 is set to propel the adoption of cryptocurrencies to levels never seen before. The G20 countries announced on 11 July that they might introduce a regulatory framework to payment of digital currencies and allow “digital currency” instead of just cash payment methods.

The Group of Twenty or G20  is an international forum for governments and central bank governors from 19 countries and the European Union. Members of the G20 are Argentina, Australia , Brazil , Canada, China , Germany, India , Indonesia, Italy , Japan, Mexico , Russia, Saudi Arabia, South Africa, Turkey, United Kingdom , United States of America and the European Union.

G20 ‘s attention to cryptocurrencies is a big deal for the entire industry. The successful approval of the proposed new bill is lucid: it will stimulate the mass adoption of digital currencies. This massive adoption is due to the fact that G20 nations account for 90 % of the world’s gross revenues.

In addition, more than 80% of all trade activities worldwide take place in these countries. And also the G20 countries account for more than 50% of the world’s total land area and two-thirds of the world’s total population.

G20 to enact FATF digital currency payments guidelines

The Financial Action Task Force ( FATF) is a body founded in 1989 to battle money laundering. The Authority held its annual Private Sector Consultative Forum in Austria this month, and digital currency payments were among the topics discussed.

The FATF reiterated that the guidelines and recommendations for implementing digital currency payments are still in place. Subsequently, the authority advanced to show its support for virtual assets, stating that crypto assets could have a significant impact on the world economy.

The G20 nations have also accepted  to support the guidelines recommended by the FATF by enforcing them. In particular, Russia, one of the G20 nations, has agreed to establish a regulatory structure for crypto assets in the country. The enactment of a clear structure in line with the FATF Directives was planned for July last year, but Russia is set to implement it this month.

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In addition, another G20 member in Japan is actively working to establish a policing guideline for crypto assets in the country. South Korea is also reportedly prioritizing a clear regulatory structure and is working towards the realization of a consistent structure. On the other hand, South Africa and China could potentially see a change in cryptocurrency policing in their respective countries this year.

UK-Based Crypto Firms Receive Closure Threats from FCA

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The UK-based crypto firm received a reminder from the Financial Conduct Authority on 22 June regarding the submission of completed registration forms before the end of the month. The Authority intends to create adequate time for the processing of applications before the registration deadline of January 2021.

The FCA is responsible for overseeing the efforts of the United Kingdom to combat financial crimes such as money laundering and terrorist financing. Besides that, earlier this year, on 10 January, the Authority assumed jurisdiction over more power over virtual assets.

“Any businesses that started carrying on business in the UK immediately before January 10 2020 and are not registered by the FCA by the January 10 2021 deadline will have to cease carrying on business. Any new businesses which began operating after January 10 2020 must be registered with the FCA before carrying out any business,” wrote the FCA.

FATF and AMLD5 implementation in Europe

The Fifth Anti-Money Laundering Directive came into force in the United Kingdom on 10 January. The Directive, which will be implemented in all European union member countries, is intended to restrict crypto-related companies. The AMLD5 extended the realm of knowledge-your-customer (KYC) that crypto-exchanges should undertake.

UK-based crypto businesses should also register with the Financial Conduct Authority and should also be verified by the authority. Digital currencies are popular with criminals for a valid reason; their privacy features. According to a report by the research firm Cypher Trace, 0.69 percent of all cryptocurrency transactions in UK-based crypto firms originally came from criminals.

UK-based crypto firms to comply with new regulations

The FCA is tightening loops to commit such financial crimes in the United Kingdom. The authority highlighted that it is motivated to oversee UK-based crypto firms that are compliant with the new AMLD5 directive and FATF regulations; the body will take the necessary response if the firms fail to comply with all the new rules.

Furthermore, UK-based crypto firms should also comply with the new regulation in the industry. The Financial Action Task Force (FATF) proposed that crypto firms abide by the “travel rule.” FATF is an international multi-governmental authority; tasked with combating organized crime, corruption, and terrorism.