Accordingly, payment and electronic money institutions will not be able to mediate platforms that offer trading, custody, transfer, or issuance services for crypto assets besides mediating fund transfers from them.
The regulation will come into force as of April 30, it added.
Separately, the bank warned of the risks of crypto assets such as not being subject to any regulation or supervision mechanisms or central regulatory authority, excessively volatility, and possibly being used in illegal actions due to their anonymous structures.
The bank added that wallets can be stolen or used unlawfully without the authorization of their holders, and transactions are irrevocable.
"Their use in payments may cause non-recoverable losses for the parties to the transactions due to the above-listed factors, and they include elements that may undermine the confidence in methods and instruments used currently in payments," the bank said in a statement.
Earlier at the beginning of this month, the country sent a notice to cryptocurrency exchanges operating in Turkey requesting user information, a development that was interpreted by some as a move linked to tax regulations of digital currency.
Treasury and Finance Ministry said at the time that financial intelligence units around the world fight the laundering of criminal revenues and financing of terrorism.
The government last month said it shares global concerns regarding cryptocurrencies and that the developments are being closely followed.
Treasury and Finance Minister Lütfi Elvan stressed they “have serious concerns about cryptocurrencies.”
“It is not just us, there is anxiety all over the world,” he added. “We have appointed our deputy minister regarding the bitcoin transactions in Turkey.
A growing boom in Turkey's crypto market had gained further pace recently, with investors hoping to both gain from bitcoin's rally and shelter against inflation.
Following the decision, Bitcoin fell 2.59% to $61,757 at 5:57 a.m. GMT.