Capital Markets Newsletter

This newsletter updates readers on the recent developments occurred in May 2024 in the Turkish capital markets. It includes (i) the Draft Amendments to Capital Markets Law Regarding Crypto Assets ("Draft Crypto Law"), which was submitted to the Grand National Assembly of Türkiye on May 16, 2024; (ii) expected amendments to the Communiqué on Principles Regarding Real Estate Investment Funds ("Communiqué"); and (iii) recent initial public offerings.

The Draft Crypto Law, which regulates crypto assets, was placed on the agenda of the Grand National Assembly of Türkiye in January 2024. On May 16, the Grand National Assembly of Türkiye received the final version of the proposed law for consideration.

The scope of the Draft Crypto Law does not include all crypto assets. It will not apply to crypto assets other than (i) those that will be traded, first sold, or distributed by the Platforms in accordance with the Draft Crypto Law's principles, and (ii) those that provide rights specific to capital market instruments. The Turkish Capital Markets Board (“Board”) shall have the authority to regulate crypto assets those within the scope of the Draft Crypto Law.

The Draft Crypto Law defines (i) crypto asset trading platform (“Platform”), (ii) Platform, crypto asset custodial and other services providers (“Service Provider”) and the (iii) the software, system or application ensuring the transfer and the storage of the crypto assets (“Wallet”).

The capital market instruments are deposited by the Central Securities Depository of Türkiye (“MKK”). However, the crypto assets may be deposited in the electronic platforms provided by Service Provider after the entry into force of the Draft Crypto Law. The Board may require an integration between MKK system and the system provided by Service Provider. The Board may also control the issuances of crypto assets, with technical backing from the Scientific and Technological Research Council of Türkiye (“TÜBİTAK”).

The Draft Crypto Law requires Service Providers to get (i) establishment and (ii) operation permission from the Board. In this regard, Service Provider willing to operate must apply to the Board within 1 (one) month of the Draft Crypto Law's entry into force. The conditions to be a Service Provider are quite similar to those of Brokerage Firms.

Under the Draft Crypto Law, any contractual terms that eliminate or limit the liability of Service Provider against their customers shall be null and void. Also, the crypto assets belonging to the customers of the Platform are, in principle, stored in their own Wallet. In this context, the crypto assets of the customers cannot be seized, and injunctions cannot be imposed on the crypto assets of the platforms due to the debts of the Platforms.

The Draft Crypto Law, however, reserves the provisions of the legislation on the protection of the value of Turkish currency regarding all kinds of transactions related to the crypto assets.

Each year, 1% of all revenues of the Platforms, excluding the previous year's interest income, will be paid to (i) the Board and (ii) the TÜBİTAK each.

On the other hand, Service Provider established abroad is obliged to terminate their activities for Turkish residents within 3 (three) months following the entry into force of the Draft Crypto Law.

The Turkish Capital Markets Association (“TCMA”) submitted the expected amendments to the Communiqué to the consideration of the capital market actors. Furthermore, Mehmet Şimşek, the Minister of Treasury and Finance, stated on May 26 that these expected amendments to be published by the Board will lead to investment by real estate investment funds (“REIF”) in the real estate project.

Ömer Gönül, Chairman of the Board, stated that the expected amendments on REIF have been prepared to further develop capital markets and to contribute to the elimination of the recent problems in access to housing in Türkiye.

As it is known, REIF, which provide significant tax advantages for investors, is only allowed to invest in finished projects under Turkish law. With these amendments, it is planned to enable the establishment of “Project REIF” to develop real estate projects, the majority of which will consist of residential independent sections. Hence, Project REIF will be separated from the existing REIF that cannot include projects in their portfolios within this scope.

Project REIF will be able to develop projects both on land owned by themselves and on land owned by other persons with whom they have signed contracts. Accordingly, Project REIF will be able to include in its portfolio only the land on which the project will be developed, real estate projects, real estate developed within the scope of the project.

3. Recent Initial Public Offerings

In May 2024, the Board authorized 9 (nine) companies’ initial public offering (“IPO”) application: (i) Koç Metalurji A.Ş., (ii) Altınay Savunma Teknolojileri A.Ş., (iii) Hareket Proje Taşımacılığı ve Yük Mühendisliği A.Ş., (iv) Özyaşar Tel ve Galvanizleme Sanayi A.Ş., (v) Onur Yüksek Teknoloji A.Ş., (vi) Horoz Lojistik Kargo Hizmetleri ve Ticaret A.Ş., (vii) Yiğit Akü Malzemeleri Nakliyat Turizm İnşaat Sanayi ve Ticaret A.Ş., (viii) Altınkılıç Gıda ve Süt Sanayi A.Ş., and (ix) İz Yatırım Holding A.Ş. Indeed, the increase in IPOs is noteworthy during this time of relatively high interest rates.