The Capital Markets Board (CMB) issued an announcement in late September addressing the much-disputed status of digital tokens and Initial Coin Offerings (ICO). CMB stated that it does not regulate or supervise ICOs, and also noted that it does not regulate or supervise most practices in which blockchain technologies are being used, such as cryptocurrency offerings and token offerings.
The CMB, which is the regulatory and supervisory authority in charge of the securities markets in Turkey, expressed its view that, although some ICOs may involve clear and concrete commitments (such as the financing of a company or a project), they usually include only vague promises. In this respect, the CMB emphasized that ICOs are risky and speculative investments, and warned investors to consider, recognize and acknowledge the risks listed below when investing in ICOs, and advised them to ensure that they perform a detailed analysis of their expected results:
- Most ICOs are not regulated or supervised by any regulatory bodies due to their structure;
- Token values may be subject to excessive fluctuations, as is the case with cryptocurrencies;
- The collected funds may not be used for the stated/communicated purposes by the ICO holders;
- Sales documentation for the ICO may contain incomplete or misleading information;
- The investment project may fail or the investment funds may be lost completely, as funded projects are usually at a premature stage.
In the same announcement, the CMB has declared that the secondary legislation for crowdfunding is underway. It also indicated that the status of ICOs (which is similar to IPOs and crowdfunding) and whether or not they will fall under the supervision of the CMB will vary on a case-by-case basis.
Finally, the CMB emphasized that unauthorized transactions under the name/pretext of “crowdfunding” that are carried out before the secondary legislation goes into effect will be subject to administrative and penal sanctions and warned investors to disregard and not participate in any potential sales of cryptocurrencies that occur under the guise of “crowdfunding.”