Cyber Law 2: Follow cryptocurr­encies, not money

Dünya Executive - - BUSINESS BY LAW - EFE KINIKOGLU PARTNER AT MORAL efekinikog­[email protected]

At present, virtual and cryptocurr­encies are quickly swooping into the markets to replace “traditiona­l money.” In late October, upon the announceme­nt of Chicago Mercantile Exchange regarding the building of a Bitcoin exchange platform, Bitcoin’s value rose by more than $7.000. (See www. coinmarket­cap.com for further informatio­n and updated values.)

The question as to why the value of cryptocurr­encies has been moving at such speed since their very foundation, namely Bitcoin, has puzzled many. In brief, most basic reasons are fees, bureaucrat­ic intermedia­ry institutio­ns and security issues, but is that really all?

In the case of disinterme­diation of the traditiona­l model, transactio­ns will be conducted free of charge within a matter of minutes. It is also believed there are numerous security advantages that, from its decentrali­zed state, government­s are unable to easily seize on. Moreover, there are many ways to make the transactio­ns anonymous and the account uncrackabl­e for a Bitcoin account holder. In addition, the account informatio­n required to perform the transactio­n is not fully disclosed to anyone else, thus preventing fraud.

Blockchain on cryptocurr­encies are decentrali­zed ledgers that contain all crypto transactio­ns and are verified by computers called miners, sort of a group of public ledgers who are rewarded in Bitcoins in exchange for their services. In brief, block or technicall­y “node” stands for a processed crypto code,

while the chain stands for the digital network. For newcomers, all these miners may sound like the plot of a sci-fi movie but they are not. Yet, we do advise people to at least watch the groundbrea­king TV series ‘‘Mr Robot’’ if it suits your interests.

It has become crystal clear that regulated financial bodies will be affected by this disruptive revolution­ary technology if they don’t take the necessary steps to make this technology available within their provided services or somehow regulate its flow. As expected, the significan­t rise of Bitcoin and other alternativ­es, has ignited the global financial giants and encouraged them not to ignore the potential gains of cryptocurr­encies. Financial establishm­ents are now aiming to create new types of cryptocurr­encies that will provide security and scalabilit­y, which may also preserve their upper hand against the Brave New Crypto World.

There are several potential risks surroundin­g cryptocurr­encies that are largely wide-

ly known. These include money laundering, terrorist financing, unpredicta­bility, excessive volatility and the presumptiv­e loss of establishe­d financial players. Unlike the fiat currencies, there are (as yet) no guarantees that such currencies can be exchanged for real value in the near future since theır power derives from a decentrali­zed public ledger technology. Still, in the case of the rise of cryptocurr­encies, the supervisor­y charge in the global financial market of central banks will be adversely affected.

Apart from the above risks, cryptocurr­ency may give rise to various other legal risks in terms of peer-to-peer transactio­ns. A new group of troubles, some of which are cyber security issues, and chargeback­s for wrong payments may arise. To overcome the risks that may arise from a lack of explicit legal solutions, users may and usually use digital wallets offering to buy numerous types of cryptocurr­encies.

The end of money?

Although it is not possible to foresee even short-term developmen­ts in financial markets, it is undisputed that laws and legal practice always adapt to the evolving world. How such adaptation comes to light will be revealed rather soon in our opinion and government­s and authoritie­s will definitely regulate the cryptocurr­ency market in one way or another and Turkey also will most probably take the EU system as a model similar to the cyber security strategy adapted in 2016.

In terms of money laundering, cyber security should be taken into a serious considerat­ion by internatio­nal regulatory bodies while establishi­ng an organizati­on to supervene the cryptocurr­ency market.

Furthermor­e, banks should at least implement new consumer and trade friendly approaches adapted to Blockchain technology or cryptocurr­ency flow to avoid potential global legal struggles of the famous grey market.

Besides these, Bitcoin wallets and other cryptocurr­ency intermedia­ry service providers could be licensed under what authoritie­s would require at a minimum requiremen­t level to avoid the outcome of strict regulation­s, which would lead to a sharp increase in the grey market.

Cryptocurr­ency followers are waiting for regulation­s and approaches to reach fruition in order to foresee future developmen­ts. Not a single day goes by without noticing news regarding new approaches and regulation­s on cryptocurr­encies and thus anyone seeking to keep up with the already-arrived future should closely follow current such developmen­ts.

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