Global watchdog urges Turkey to strengthen crypto rules

LONDON, Nov 11 : Turkey needs to further strengthen its regulatory framework for crypto assets and stablecoins to address potential financial stability risks linked to the fast-growing sector, the G20's Financial Stability Board said on Wednesday.

In a review of Turkey's implementation of international standards for crypto assets, the global financial watchdog said the country had made "meaningful progress" by putting much of the crypto market under regulatory oversight.

But it said further action was needed to improve alignment with the FSB's global recommendations and address the risks of a largely retail investor-driven sector that saw nearly $200 billion worth of transactions last year, according to the review.

It highlighted that cryptocurrencies and stablecoins have become increasingly important in Turkey for those seeking protection from years of sharp lira depreciation and high inflation.

The FSB recommended the establishment of dedicated regulations around stablecoins, which are typically pegged to the dollar and have been growing in popularity.

"There remains no framework in place for the regulation of stablecoin issuers," the FSB said, describing it as "a core financial‑stability concern" given the strong FX‑linked channels and potential for "digital dollarisation". 

SAFEGUARDS TO CURB CRYPTO, BROADER FINANCIAL SYSTEM LINKS

The FSB's concerns add to a growing list of tasks for Turkey's authorities, who are scrambling to tighten regulations after a $20 billion investment fund scandal left millions of Turks out of pocket.Wednesday's crypto review noted the country had introduced safeguards aimed at limiting links between crypto assets and the broader financial system, including banning their use for domestic payments.

But it urged authorities to also put in place a formal framework for monitoring financial stability risks, to collect and centralise more market data and improve cooperation with overseas regulators.

"The borderless character of these markets means that no jurisdiction can address the associated risks through domestic action alone," the FSB said.