The upcoming crypto asset law this year: What’s happening around the world?
This year, we’re on the brink of introducing our own law concerning crypto assets. A glance at the publicly shared draft suggests that positioning Turkey as a global hub in this burgeoning technology isn’t the primary goal. For instance, countries like the United Arab Emirates are striving to become global centers in this field by establishing specialized regulators. Singapore and Hong Kong are following suit. Meanwhile, regulators in populous nations like ours are instinctively prioritizing consumer protection. It seems to be the natural course for the industry.
Recently, the global crypto asset markets have witnessed a resurgence. Bitcoin has once again soared past $50,000, pushing its total value to hit the $1 trillion mark. The overall market value of crypto assets has now crossed $2 trillion. In a way, it’s like we’ve turned back the clock two years. This rally is partly fueled by the establishment of regulatory frameworks worldwide. Banks and institutional players tend to navigate more comfortably when there’s a regulatory framework in place. To date, over 20 jurisdictions worldwide have introduced crypto asset regulations, with about 40 others in the pipeline. A look at how our draft law has evolved from its 2021 version to now suggests that our “wait-and-see” approach was spot-on.
However, the devil is in the details. The real test will come with the regulations and guidelines the Capital Markets Board in Turkey (SPK) will issue post-law enactment. For example, if the SPK demands data localization similar to that in regulated brokerage firms, operating in Turkey could become impractical. Each technology has its unique needs. Let’s also not overlook the risks of blindly following European Union legislation. The scale of Europe and ours differs significantly. When you aim to apply Europe’s data localization standards in Turkey, comparing the impact of a server in Munich serving the globe’s economic titan to one in a local city tackling the needs of the world’s 19th largest economy just doesn’t add up. And that’s precisely why setting up such a server often remains a dream!
Leaving these tedious issues aside, let’s explore the rising trends in the global crypto asset market for 2024: Currently, the hottest topic worldwide is asset tokenization. Tokenization means breaking down an asset into parts, each of which can be bought and sold on the blockchain. This includes real estate, artworks, major infrastructure projects in energy and healthcare, stocks and bonds traded in financial markets, and assets traded within online games. You might wonder, don’t traditional instruments like real estate investment trusts already exist for this purpose? They do, but changing technology now allows for transaction costs to be almost eliminated. Moreover, unlike traditional finance that operates within business hours, the market for tokenized assets is open 24/7, enhancing liquidity for these assets. Consulting firm Roland Berger predicts that by 2030, the asset tokenization market could grow 40 times its current size, reaching $10 trillion.
So, where will the liquidity used to purchase these tokenized assets go once they’re sold? It’s likely to flow into stablecoins pegged to fiat currencies, like the Turkish Lira or the US dollar, rather than converting back into fiat money. Thus, a significant increase in the supply of stablecoins is expected globally in the coming period. Getting the stablecoin formula right could mean big money. For instance, Tether’s daily trading volume has reached $65 billion. Assuming this money is held in risk-free assets, like overnight deposits at today’s interest rates, it could generate about $4 billion in pure profit annually.
The world of stablecoins has evolved in a largely unregulated manner, leaving us uncertain about where their reserves are held. Nowadays, countries aspiring to be global crypto hubs are issuing regulated stablecoins. For example, the United Arab Emirates is preparing to issue stablecoin licenses in both its currency, the dirham, and the US dollar. Remember, the dirham has been pegged to the dollar for 27 years, making a dirham stablecoin effectively a dollar stablecoin. Singapore is also gearing up to issue similar licenses, with the Singapore dollar pegged against a basket of foreign currencies.
The expected crypto asset law in Turkey plans to delegate regulations related to asset tokenization and stablecoins to respective authorities, a wise move. For instance, the Central Bank might regulate stablecoins, the SPK could handle the tokenization of securities, and perhaps one day, the Ministry of Trade might oversee the tokenization of in-game assets. Countries that advance in these regulations will prevail. But let’s remember, advancing doesn’t mean hastily enacting regulations. It means finding the most suitable regulation that aligns with a country’s economic, social, or political conditions and its global aspirations.
This article is a translated version of “Kripto varlık kanunu bu sene çıkacak, peki dünyada ne oluyor?” which was initially published in Economic Daily (Nasıl Bir Ekonomi Gazetesi) in Economic Daily on February 23, 2024.
