Turkish regulators have introduced the country’s first comprehensive crypto legislation to regulate its burgeoning cryptocurrency market, outlining licensing and compliance requirements for crypto-asset service providers (CASPs).

On July 2, Turkey’s parliament approved legislation aimed at helping the country exit the Financial Action Task Force’s (FATF) “gray list” of countries with insufficient anti-money laundering measures. The new law introduces licensing, compliance, and transaction requirements for CASPs, and imposes an annual fee of 2% of trading income on platforms and custody services.

While the new regulation provides greater clarity, it also increases operational costs and hurdles for exchanges. The full impact on local and foreign market participants is expected to become clearer with the introduction of secondary legislation.

Turkey’s cryptocurrency market has experienced significant growth, fueled by economic factors such as high inflation, currency devaluation, and a burgeoning population of crypto enthusiasts. The Turkish Lira (TRY) has been a key driver of this growth, with its trading volume surging from a few million dollars to over $10 billion in the past four years.

Although TRY’s trading volume in 2024 has remained below the 2021/2022 peak of $37 billion, it has demonstrated resilience, maintaining over $10 billion in monthly volume for eight consecutive months.

Year-to-date, the Lira’s cumulative volume has reached approximately $95 billion, nearly matching the total for 2023. In the past two years, it has consistently ranked fourth in trade volume behind the U.S. Dollar, Korean Won, and Euro.

Furthermore, the Lira is closing the gap with the euro, with its market share rising from 10% in early 2022 to approximately 40-50% today. In early June, the TRY even briefly surpassed the euro in total volume.

Turkey’s ongoing struggles with double-digit inflation and currency devaluation have also spurred crypto adoption. The average inflation rate over the past five years has exceeded 40%. Despite efforts to normalize monetary policy after the 2023 elections, the Lira has continued to gradually lose value in 2024.

Meanwhile, Bitcoin (BTC) has appreciated significantly since 2021, becoming an attractive store of value despite its volatility. The BTC-TRY trading pair has surged by over 800% since 2021, outperforming other fiat-denominated BTC pairs.