Turkey is currently in the process of reworking its cryptocurrency regulations, with the primary goal of meeting the requirements set by the Financial Action Task Force (FATF) to get off the FATF’s ‘grey list.’ This classification has been a persistent concern for the country since 2021.

Here are the details.

Turkish Government’s Stance Made Clear

A recent evaluation by FATF revealed that Turkey was in compliance with 39 out of the 40 regulatory criteria. In response, Finance Minister Mehmet Şimşek has announced that new legislation, focusing on the previously overlooked crypto-assets, will be promptly presented to the Turkish Parliament.

“Crypto-assets are the final frontier for us. Our existing legal framework has not adequately covered them, and we’re committed to fixing that,” said Şimşek.

Also Read: Turkey’s Bold Move: Cryptocurrency Regulation on the Horizon in 2024

Identifying the Need of the Hour

This determination to meet FATF standards comes at a pivotal moment as Turkey grapples with significant economic turbulence, including a high annual inflation rate of 61.53% in September.

The area where Turkey fell short in the FATF evaluation was crypto-assets, a realm known for its potential to facilitate money laundering and terrorist financing. To address this issue, the Turkish Finance Ministry is planning comprehensive studies involving crypto asset service providers, taxation, and the classification of virtual assets.

“In the eyes of the international community, crypto-assets are increasingly viewed as a litmus test for a country’s financial security protocols. Turkey recognizes this and is acting decisively,” commented Timothy Ash, a senior strategist at BlueBay Asset Management.

Turkey’s Bank Makes Bold Moves

Turkey’s central bank has already ramped its policy rate by 500 basis points to 35% in an aggressive bid to tame inflation. This marks a significant policy shift from President Recep Tayyip Erdoğan‘s earlier aversion to high rates, contributing to the lira depreciating by almost 70% over the past two years.

With the central bank indicating further rate hikes, it is evident that Turkey is committed to stabilizing its economy and restoring its international reputation.

FATF’s Status

However, as Minister Şimşek noted, Turkey’s FATF status isn’t purely about meeting technical standards; it’s also a matter of politics. “After this law is passed, there should be no reason for Turkey to remain on that grey list unless other political considerations come into play,” he cautioned.

Read More: Crypto Adoption Surges in Turkey Amid High Inflation, Says Binance CMO

Turkey’s presence on the FATF grey list has resulted in economic consequences and damage to its reputation on the global stage. The country’s new approach to crypto regulation could be the key to financial transformation and a return to international acceptance.