Blockchain technology is being used in different sectors at an increasing rate. In parallel, indirect or direct regulation studies on blockchain technology are accelerating in 2023. A legal transformation triggered by blockchain is taking place in many different areas, from crypto-asset markets to electronic trading documents, from decentralized autonomous organizations to central bank digital currencies.
Research and studies on areas of usage of blockchain technology other than cryptocurrencies continue in Turkiye also. In the “Medium Term Program 2024-2026” document published in the Official Gazette on September 6, 2023, reference was made to the application areas of blockchain technology.
In the program, under the title of “Policies and Measures”, it was stated that “the development of domestic technologies for digital transformation such as artificial intelligence, big data, cloud computing, blockchain, cyber security and cyber-physical systems in the industrial and service sectors will be supported”. Additionally, the issuance of securities through blockchain-based smart contracts and the digitalization of issuance processes are also included in the program. It is obvious that we need to be proactive about regulation in order to realize these plans and carry out the expected transformation in a less painful way.
Consumers are showing great interest in cryptocurrencies, NFTs, and other DeFi tools. However, crypto asset products and markets can be complex for consumers. For example, since tokens are defined by smart contracts, it is very difficult for consumers to determine and evaluate their own legal status by understanding the smart contract code. In addition to the risks caused by technology literacy not being at the desired level, the volatility of the value of crypto assets also brings difficulties for consumers.
The value of many crypto assets is determined by consumer demand. For this reason, there may be sudden and large changes in their values; This prevents crypto assets from being an ideal payment tool. In addition, insufficient, unrealistic, or misleading information about crypto asset markets may be shared on social media. In such information or advertising activities, the emphasis is on the winning part and the risks are left in the background.
In Europe, various supervisory authorities have issued some warnings to consumers that some crypto assets may be risky and speculative. It was stated that consumers should be wary of misleading advertisements, social media tools, and influencers. In Turkey, the Capital Markets Board stated in 2018 that ICOs (initial coin offerings) are very high-risk and speculative investments and pointed out that investors should examine in detail what is promised in return for digital assets.
It should also be noted that the distributed ledger technology underlying crypto assets is vulnerable to cybersecurity risks. It frequently comes to the fore that crypto asset issuers and service providers, such as exchanges and wallet providers, experience some operational problems and are subject to cyber-attacks. It is inevitable that consumers will be victimized as a result of these attacks.
Transactions with digital assets are closely related not only to commercial law or capital markets law but also to consumer law. Consumers are more open to grievances related to crypto assets. In addition to the risks mentioned above, in many countries, services and products related to crypto assets remain outside the scope of the rules regarding traditional financial services. However, it is critical to underline the following: The fact that transactions carried out with crypto assets take place in the digital environment does not mean that they are immune from measures regarding consumer protection.
The protection of consumers in the blockchain ecosystem is the focus of policymakers and legislators. The implementation of the MiCA (Markets in Crypto Assets) Regulation in the European Union will have significant impacts on crypto asset ecosystems around the world. For this reason, one of the most essential purposes of the Regulation is the protection of consumers, which is of great importance for this segment that is vulnerable to victimization.
There is a need for rules that will ensure that consumers know and understand the content of the rights contained in the tokens they purchase. Especially if tokens are linked to off-chain assets or services, it is of great importance to ensure compatibility between the descriptions in digital materials and the function of the token. In addition, it is necessary to ensure that the natural language descriptions used in promotions match the descriptions in the smart contract.
It would be useful to create a legal framework for how general consumer law mechanisms such as the right of withdrawal, the right to information, protection against general transaction conditions, and resolution of consumer disputes will be applied in transactions involving crypto assets. Measures must be taken to protect consumers in the securities issuances mentioned in the Medium Term program in Turkiye.