Capital market regulations for cryptocurrencies
Cryptocurrencies are a new phenomenon in Turkey with little regulation and business standards. While regulatory institutions have been timid about preparing legislation to handle them, Turkey’s first cryptocurrency trading platform, BtcTurk, is now trying to establish the rules of the business based on a system it has founded. Established five years ago as the world’s fourth cryptocurrency market, BtcTurk was bought by Ozgur Guneri and since then, major changes have taken place in the structure of the company. It has established departments such as treasury, legal compliance and internal audits which act as a kind of rules-based regulatory department within the company itself. We spoke to Guneri about the sector and the changes in the company.
Why s there st ll no regulat on n the sector?
Regulatory agencies say, “Do not get us involved, it’s not our job. We do not know exactly what it is anyway.” They have worries such as if they prepare legislation, people will come to this market and they will have trouble if the prices come down. However, such regulation is still needed. In our opinion, the Capital Markets Board (SPK), Banking Regulation and Supervision Agency (BDDK) and Financial Crimes Investigation Board (MASAK) can be involved in formulating regulations from their specific points of view.
BtcTurk is a virtual marketplace in legal terms. There is legislation there and we have to obey that. Apart from that, we are not a regulated market. But we are not illegal. If I make an ICO (cryptocurrency public offering) and collect money from people, or if I manage their portfolio by trading cryptocurrency or do investment consultancy on this, I fall into illegal situations. So I do not want to go into any of these.
There is also a concept called prudent trader in the capital market and banking laws. That’s exactly what we’re trying to do. It means if authorities come and look at what we are doing, I I can give them transparent answers. If a regulation formulated one day, I want BtcTurk to be seen as a model company and our practices to be taken as a base for that regulation. This is my purpose and my dream.
What has been done so far?
We have established departments such as treasury, legal compliance and internal audit. We have created a maker-checker mechanism. Nobody in the company, including myself, can do anything on their own. Approval of at least three directors is required to transfer any coin from one place to another. The assets of the company and the customer are held separately in the bank. If asked, I can request a report on our customers’ accounts instantly. The same applies for Bitcoin. For example, we strictly apply the ‘customer diagnosis’ rule of MASAK. However, this rule is not applied throughout the sector. There must be a standard on this and many other areas.
At the end of the day I think the business is financial services. The greatest risk in this sector is that a few people come together around the technology and start doing business without ever having heard of reconciliation or separated accounts in their lives and with no knowledge of how a financial services company works. Doing this business in such a way would be a great risk. At the moment we have about 90 people working. If requested, this company could also run with 20 people but many parts would be missing.
How valuable s your cap tal markets background?
I manage BtcTurk exactly as how I managed Finans Invest. I think that it is necessary to be aware of the seriousness of this business in order to be sustainable. We have an important responsibility.
Why you to bel eve n th s bus ness?
I think the current monetary system is now blocked. I think a market where trillions of dollars in bonds are in negative interest and global debt is over $230 trillion is unsustainable. I believe that there will be a correction in the future and that Bitcoin will benefit from it. I think that Bitcoin and blockchain technology in general will change our life, in the same way as the internet. I am not saying that dollars will disappear in a day; we will come to this point gradually.
How has the B tco n market developed and how does that affect your bus ness?
Bitcoin usage was not very intensive until October last year. By December, ten thousand members a day were coming to BtcTurk. There was a queue at the door. The business grew so quickly. This year did not start badly but then the business slowed down. Our trading volume has exceeded 2,000 bitcoin per day in the past but now, there are days where there are 200 or even 100. But a momentum has started again with the increase in prices. Price fluctuations affect us directly.
What can you say about your nvestor prof le?
There’s a segment of investors which only buy and sell. There are those who buy and transfer to the international stock exchanges. But the majority buy bitcoin and sell when there is a big price change. The first entrants to this business were the technologically curious. After all the action in December, white-collar workers entered this business. I have been in capital markets for years, and I have seen none of my friends buying a lot of stocks, even when the prices were down. Instead, they all entered the bitcoin market. Later on, when the transactions in bitcoin stopped, there occurred a little melt down in our TRY assets while our crypto-assets continued to increase.
What are your company goals?
We currently have 516,000 members of which 96,000 are active. We aim to make this a billion. Things have slowed down in the first half of the year, but there is a stir now. On the other hand, our company has a dual structure. BtcTurk is a platform. The there’s BtcTrader, which makes up the technological infrastructure. We would like to offer this infrastructure service to other companies around the world. We are negotiating with one country in the Gulf and another in Europe. Soon they can start their services using our infrastructure. There are only a few companies in the world who do the work that BtcTrader does. In this sense, we think it is a niche area with lots of potential to grow in the future.