Crypto-Assets have gained significant traction in the financial system in recent years. Consequently, regulatory bodies have been developing regulations to address the opportunities and risks presented by cryptocurrencies. This article compares the European Union’s (EU) Markets in Crypto-Assets Regulation (MiCA) and Turkey’s current draft legislation, highlighting key gaps in Turkey’s regulation and offering recommendations for improvement.

Authorization Procedures

EU Regulation: MiCA mandates specific authorization procedures for electronic money tokens issuers. For example, an e-money token cannot be publicly offered or admitted to trading on a crypto-asset trading platform unless the issuer is authorized as a credit institution or an ‘electronic money institution’ under Article 2(1) of Directive 2009/110/EC. These specific authorization requirements ensure the credibility of issuers and market order.

Turkish Draft: The Turkish draft legislation does not clearly define these specific authorization requirements and procedures. This lack of clarity creates uncertainties in the authorization process of issuers and risks market security. To address this gap, Turkey needs to detail the authorization process and set specific criteria for issuers.

Prohibition of Interest Payments

EU Regulation: MiCA prohibits e-money token issuers and crypto service providers from offering interest to e-token holders. This regulation aims to prevent unfair competition among market participants and maintain market stability.

Turkey Draft: The Turkish draft legislation does not include a clear prohibition on interest payments. This gap could lead to unfair competition and negatively impact market stability. Therefore, Turkey should implement similar regulations prohibiting interest payments.

Crypto-Asset Service Providers

EU Regulation: MiCA includes detailed rules for identifying and regulating significant crypto-asset service providers. Article 85 outlines criteria for defining these significant providers, enhancing market security and transparency.

Turkish Draft: The Turkish draft legislation lacks clear definitions and regulations for significant crypto-asset service providers. This omission can create market uncertainties and reduce the effectiveness of regulatory oversight. Clear definitions and regulations for significant crypto-asset service providers are necessary.

Insider Information and Market Manipulation

EU Regulation: MiCA provides detailed regulations on the definition of insider information, the disclosure of such information, and prohibitions on market manipulation. These regulations ensure market transparency and investor protection.

Turkish Draft: The Turkish draft legislation addresses insider information and market manipulation less comprehensively than the EU regulations. This gap can adversely affect market transparency and reliability. More detailed and stringent regulations on insider information and market manipulation are needed.

Technical Documents and Marketing Communication

EU Regulation: MiCA sets out detailed rules and responsibilities regarding crypto-asset technical documents and marketing communications. These regulations ensure that investors have access to accurate and comprehensive information.

Turkish Draft: The Turkish draft legislation lacks sufficient regulations regarding technical documents and marketing communications. This deficiency can hinder investors’ access to adequate information and reduce market transparency. More detailed regulations on technical documents and marketing communications should be implemented.

Supervision and Sanctions

EU Regulation: MiCA outlines comprehensive supervision obligations, administrative sanctions, and other measures. These regulations enhance the compliance of market participants and the effectiveness of regulatory oversight.

Turkish Draft: The Turkish draft legislation does not clearly define supervision and sanctions. There are uncertainties regarding the implementation and enforcement mechanisms. Clear and detailed regulations on supervision and sanctions are necessary for effective regulatory oversight.

Conclusion

The Turkish cryptocurrency regulation has several gaps compared to the EU MiCA Regulation. Enhancing regulations in areas such as authorization, insider information management, supervision, and sanctions can increase market transparency and reliability. Addressing these gaps will contribute to establishing a more robust regulatory framework for Turkey’s cryptocurrency market.

Attorney Gökhan Cindemir

(Gökhan Cindemir is currently PHD candidate at Istanbul Commercial University – European Union and International Trade Law. His phd thesis is being conducted on the European Union regulation of the Markets in Crypto-Assets (MICA)