Some crypto-assets are designed to maintain their value by reference to a specific asset, currency or economic benchmark. These assets are commonly known as stable crypto-assets or stablecoins. However, not all stable crypto-assets operate in the same way. Some are backed by reserve assets, while others attempt to maintain price stability through algorithms, market incentives and automatic balancing mechanisms.

This second category is particularly relevant for algorithmic stable crypto-assets.

Turkish law does not yet contain a detailed statutory regime specifically for algorithmic stable crypto-assets. However, the general reasoning of Law No. 7518 refers to stable crypto-assets in a way that may also cover models based on combinations of assets, mechanisms or economic arrangements. This suggests that algorithmic stable crypto-assets may become an important regulatory issue under Turkish crypto-asset law.

What Are Algorithmic Stable Crypto-Assets?

Algorithmic stable crypto-assets are digital assets that aim to maintain their value by reference to a particular asset or benchmark, but without necessarily relying on a traditional full reserve or direct collateral structure.

Instead, they may use algorithms, supply adjustments, market incentives and automatic mechanisms to keep their value close to a target price.

For example, an algorithmic stable crypto-asset may attempt to remain close to the value of a particular currency by automatically increasing or decreasing supply. Whether this mechanism works depends on market confidence, liquidity, user behavior and the ability of the algorithmic system to respond to stress conditions.

Why Are Algorithmic Stable Crypto-Assets Risky?

Algorithmic stable crypto-assets may be more complex and riskier than reserve-backed stable crypto-assets. Their value often depends not on directly held reserves, but on the functioning of algorithmic mechanisms and the behavior of market participants.

A system may appear stable under normal market conditions. However, in the event of a sudden loss of confidence, heavy selling pressure or a liquidity crisis, the stabilization mechanism may fail.

Main risks may include:

Insufficient reserves or lack of collateral,

Failure of the algorithm during market stress,

Sudden loss of user confidence,

Liquidity shortages,

Inability of the system to self-balance,

Collapse of the price stabilization mechanism,

Inability of users to redeem or exit their positions.

For this reason, the word “stable” should not be understood as meaning risk-free.

Assessment under the General Reasoning of Law No. 7518

Law No. 7518 does not expressly define algorithmic stable crypto-assets in its statutory text. However, the general reasoning of the Law describes stable crypto-assets as assets that aim to maintain a stable value by referring to money, commodities, crypto-assets and similar assets, or combinations of these.

The reference to “combinations” is significant. Stability does not necessarily have to be based on a single reserve asset. Different assets, technical mechanisms and market tools may be used together to create a value stabilization model.

For this reason, algorithmic stable crypto-assets may in the future be treated as a special subcategory within stable crypto-assets under Turkish law.

Difference from Reserve-Backed Stable Crypto-Assets

There are important differences between algorithmic stable crypto-assets and reserve-backed stable crypto-assets.

In reserve-backed stable crypto-assets, value stability is usually supported by money, commodities or similar reserve assets. In such cases, the key legal questions concern whether the reserve exists, whether it is sufficient and whether it is subject to reliable audit.

In algorithmic stable crypto-assets, value stability is generally based on algorithmic rules, supply-demand dynamics and market incentives. Therefore, the legal assessment should not only focus on reserves. It should also examine how the system operates, when the mechanisms are triggered and how the system responds during market stress.

This distinction is important because the risks of algorithmic stable crypto-assets are not limited to custody or reserve transparency. System design, predictability of the algorithm, user information and technical resilience must also be considered.

Importance for User Protection

Algorithmic stable crypto-assets may be perceived by users as stable and low-risk digital assets. However, this perception may be misleading.

In models where collateral is weak or absent, users may face serious losses. If the algorithmic mechanism fails, the asset may quickly lose its link to the reference value.

For user protection, the following issues are particularly important:

Clear explanation of the algorithmic mechanism,

Explanation of how value stability is intended to be maintained,

Disclosure of whether reserves or collateral exist,

Clear and understandable risk warnings,

Explanation of whether redemption or repayment rights exist,

Determination of the responsibility of the issuer or system operator,

Proper assessment by platforms before listing.

If these issues are not properly addressed, algorithmic stable crypto-assets may create serious legal and economic risks for users.

Responsibility of Platforms

Where algorithmic stable crypto-assets are traded on crypto-asset platforms, the role of platforms becomes important. Platforms are the structures through which users may buy, sell or hold these assets.

Before listing an algorithmic stable crypto-asset, a platform may need to assess its technical structure, risks, issuer, stabilization mechanism and the information provided to users.

The following questions may become relevant:

Which reference value is the asset designed to track?

How does the stabilization mechanism operate?

Are there reserves or collateral?

Are users adequately informed about the risks?

Are the platform’s listing criteria transparent?

How will the platform act in case of a sudden loss of value?

These issues may become important in future discussions on platform liability.

Are Algorithmic Stable Crypto-Assets Electronic Money?

Whether algorithmic stable crypto-assets may qualify as electronic money must be assessed on a case-by-case basis. Under Turkish law, electronic money is a specific legal concept regulated under Law No. 6493.

For a value to be considered electronic money, it must generally be issued against funds, stored electronically, used for payment transactions and meet the legal requirements set out in the relevant legislation.

Algorithmic stable crypto-assets are often different from traditional electronic money. They may attempt to maintain value through algorithmic mechanisms rather than through a direct fund-based issuance structure. Therefore, not every algorithmic stable crypto-asset can be treated as electronic money.

However, where an algorithmic stable crypto-asset is used for payment purposes, attempts to track an official currency or creates an expectation of redemption, issues related to electronic money law may arise.

Need for Further Regulation under Turkish Law

Algorithmic stable crypto-assets are one of the areas where Turkish law may require further clarification. The reference to stable crypto-assets in the general reasoning of Law No. 7518 is an important starting point. However, the specific risks of algorithmic models may require separate consideration.

Further regulation may be needed on matters such as:

Definition of algorithmic stable crypto-assets,

Distinction between reserve-backed and algorithmic models,

Disclosure of stabilization mechanisms,

Risk warnings to users,

Liability of issuers and system operators,

Listing obligations of platforms,

Rules applicable in the event of sudden loss of value,

Relationship with electronic money law,

Redemption or repayment rights of users.

Clearer rules in these areas would support market reliability and user protection.

Conclusion

Algorithmic stable crypto-assets should be considered a special and risky category within stable crypto-assets. They aim to maintain value by reference to a specific asset or benchmark, but often rely on algorithms, market incentives and automatic balancing mechanisms rather than traditional reserve structures.

Turkish law does not yet regulate this concept in detail. However, the wording used in the general reasoning of Law No. 7518 on stable crypto-assets indicates that algorithmic models may also become subject to future regulatory assessment.

The term “stable” should be used carefully for these assets. Algorithmic mechanisms may not always ensure real value stability. Lack of reserves, algorithmic failure, loss of market confidence and liquidity problems may cause serious losses.

For this reason, the legal assessment of algorithmic stable crypto-assets should consider their technical structure, stabilization mechanism, reserve or collateral status, user information, platform responsibility and relationship with electronic money law.

More detailed regulation in this area would be important for user protection and legal certainty in the Turkish crypto-asset market.