Last week, we discussed the maturing crypto asset regulation with MiCA in the European Union. This week, we will try to look at the issue and developments from the perspective of countries outside the EU.
G20 and FSB Studies Come to the Fore
First of all, the October 2022 meeting of the G20 finance ministers and central bank leaders, which is a current development, is remarkable. The G20 consists of 20 developed countries. The meeting of the ministers and leaders of these countries has a price in terms of maturing coherent policies, both financial and legal. The G20’s council responsible for financial compliance is the Financial Stability Board (FSB). The FSB has prioritized crypto regulation in the midst of financial market regulation. For this purpose, it is the subject of a plan that tries to save crypto regulation from being local as much as possible by sharing its views and analyzes on the subject with the public. Generally speaking, aside from money laundering and terrorist financing and effort legislation, no generally accepted legislation for cryptoassets has now emerged. At this point, the FSB is a candidate to set the agenda with its proposals for discussion.
Looking closely at the FSB reports and proposals, the impression comes to the fore that the crypto-assets market and its economic volume are not as large and deep as one might think when compared to the global financial system as a whole. This valuation has an approach that aims to shape the regulation in this period, taking into account the potential that crypto assets have after exiting the bear market. Because, the FSB period leader, Dutch Central Bank Leader Klass Knot, made a statement saying that the decline in the crypto market should trigger the acceleration of regulation. In a one-on-one statement, it was mentioned that the total volume of the crypto market decreased from $ 3 trillion to $ 935 billion, and it was also stated that this loss of price did not affect financial stability and the market in a way that is feared today. On the other hand, the need for regulation of the crypto asset market, which is in the recovery effort, was emphasized due to both its potential and the security vulnerabilities that have been on the agenda recently.
What About KVHSs With FSB?
The FSB’s work has focused on the risks of crypto-asset service providers. For this reason, solutions that will protect the information they manage during the institutionalization process of KVHS and reduce the risks they carry have gained priority. Another issue is the closure and liquidation of KVHS’s with bad financial status. A special regulation for this is an agreed need as in capital market institutions. How to manage the diversified functions of KVHSs is another issue on the table. Reducing the functions of KVHS’s or creating KVHS types according to the functions stand out among the analysis options.
FSB’s Support Asset Attitude
The most criticized point of crypto assets is support assets. The legal nature of crypto assets becomes problematic when attached to an expensive backing asset. In addition, it is questioned whether those who are indexed to a fixed asset really hold this support asset or what the size of this support asset is. The FSB adopts an approach that finds it appropriate for these types of structures to be publicly disclosed in a clear form and then audited. Let’s add that it is not an approach that is required to be issued on the basis of a stable or support asset or in a focused form.
How Harmonious Will FSB Studies Be?
The FSB has prioritized that the regulations to be made will be compatible on the basis of countries. Because technology and technology assets are not local. In that respect, no sane country is in a position to make my own arrangements independently of everyone else. The FSB, on the other hand, tries to shape the process with reports and statements that guide local authorities and point out common needs. With the OVP in our country, it was aimed to include crypto assets in the scope of legal regulation in the middle of 2023-2025. The situation is also a matter of speech for the FSB. Formation of basic principles and frameworks by 2023 and completion of domestic legal regulations by 2025 is a clear element of the plan. For some, this is a long overdue date. However, we observe a valuable degree of harmony in the FSB – MiCA calendars.
Is the situation different in the USA?
In the US, however, the aggressive practices of the SEC and the CFTC, the commodity futures committee, are creating conflict in their pursuit of ownership of the issue. While the SEC is trying to defend the market with its focus on capital market instruments, the CFTC is determined to own the scene with its decisions on crypto assets futures and options, and again on favoring commodity-oriented cryptoassets. What is different is that while all this is happening, investors and entrepreneurs have started to go to countries that either have no regulations on crypto assets or have very little regulations. Time will tell whether the EU and the US are attracting the crypto asset market with their regulatory studies or pushing them to other countries. But at the moment, it is almost impossible to say that even the worst rule is better than no rule works.
How is the situation in our country?
In crypto regulation, MiCA and FSB tend to stabilize by sharing the issue in the middle of capital market law, payment services and electronic money law in one way or another. The same is true in our country. The latest changes made in the law numbered 6493 in our country contain words suitable for incorporating some of the crypto assets. Capital market law, on the other hand, is partially focused on crypto assets that can be capital market instruments, on the other hand, it is also looking for ways to adapt blockchain technology to existing capital market technology and tools.
The fact that the regulation aim of the OVP is 2023 is meaningful since this year is also an election year. But there is an issue as valuable as regulation, which is to have teams that understand the issue and can apply the truth. With this aim, both technology and market education and legal education should be given. The reason we point this out is that emerging financial technology companies make increasing and remarkable transfers from central banks, banks and capital market regulators and institutions. This is both in the world and in our country. Almost every week, we hear about the transfer of managers from official institutions related to betting. At this rate, those who make the regulation will be transferred to the institutions where it will be implemented until the regulation comes out. In this case, the question of whether the person who implements the regulation or who will interpret and shape the regulation applied to him will come to the fore.
Time will tell whether it attracts the crypto asset market to itself or pushes it to other countries with the EU and USA regulation studies, but at the moment, it is almost impossible to say that even the worst rule is enough without rules.