Technology and globalization are rapidly changing the world we live in and its usual patterns. One of the biggest followers of this rapid development is undoubtedly "cryptocurrencies". Although cryptocurrencies find more place on the agenda day by day, both economically and legally, the question marks on this issue have not been resolved yet, and the systematics and principles of this issue have not been fully established both in our country and in the world. Therefore, cryptocurrencies bring some risks and uncertainties. This article examines legal character of cryptocurrencies under Turkish Law and the approaches of regulatory authorities to this matter.

What is Cryptocurrency?

Substantially, in order for cryptocurrencies to comprehend, the "blockchain" technology, which is the underlying technology of cryptocurrencies, must be explained. Blockchain technology, which is expected to shape our future technology, records the data in it by adding them to each other in the form of blocks, thus minimizing the risks such as deletion, imitation or elimination of these records1. As such, block chain technology ensures that every transaction in the digital environment is recorded with high security. Cryptocurrencies, on the other hand, can be defined as virtual currency that is built on this blockchain technology2, can be used in exchange, and strengthens in the digital environment. Cryptocurrency ensures that no financial institution is needed in the realization of online payments, while it makes it possible for all transactions made through these currencies to be carried out quickly, under favour of its direct transmission between the parties and their independence from central money institutions3. However, the fact that these currencies are not controlled by any control mechanism causes them to remain at an unstable level to a great extent.

Occurrence of Cryptocurrencies

The first cryptocurrency, Bitcoin, was introduced to the world in 2008 with the article titled "Bitcoin: A Peer-to-peer Electronic Cash System", which was sent to a working group by a person or group using the name "Satoshi Nakamato" and Bitcoin has become the pioneer of cryptocurrencies and the largest currency. Apart from this, there are more than a thousand types of cryptocurrencies such as Ethereum, Litecoin, Ripple and Avax.

Legal Regulations

Cryptocurrencies are legally accepted in some countries. For instance, Japan has accepted Bitcoin as a legal payment instrument as of 2018. Conversely, countries such as South Korea, Singapore, and the United Kingdom do not accept cryptocurrencies as legal payment instruments6.  As it is understood, it is seen that there is not a common denominator agreed on worldwide yet.

There is no clear regulation in our law that includes cryptocurrencies. The definition of "Electronic Money" is made in subparagraph (ç) of the first paragraph of Article 3 of the Law on Payment and Securities Settlement Systems, Payment Services and Electronic Money Institutions numbered 6493. Electronic Money means that monetary value that is issued on the receipt of funds by an electronic money issuer, stored electronically, used to make payment transactions defined in this Law and also accepted as a payment instrument by natural and legal persons other than the electronic money issue. Although electronic money is in digital form, the unit of account is legal currencies such as Turkish Lira and Dollar7. It is not possible to reach the interpretation that the cryptocurrency is detailed with this definition8.

CRYPTOCURRENCIES UNDER TURKISH LAW

  1. Approach of the Central Bank of the Republic of Turkey

As a result of the fact that the definition of electronic money does not clearly cover cryptocurrencies and that some legal problems which have arisen with the increase in the use of cryptocurrency in Turkey occupy the legal agenda; the first legal regulation took place in our law, although it is not directly discussed under the title of cryptocurrencies. Regarding crypto assets, the Regulation on the Disuse of Crypto Assets in Payments ("Regulation") was published by the Central Bank of the Republic of Turkey ("CBRT")  in the Official Gazette dated April 16, 2021 and numbered 31456, to be effective on April 30, 2021. The objective of this Regulation, which is the first regulation regarding cryptocurrencies, "is to regulate the procedures and principles regarding the disuse of crypto assets in payments, the disuse of crypto assets directly or indirectly in the provision of payment services and in the issuance of electronic money, and the non-intermediation by the payment and electronic money institutions for the fund transfers from and to the platforms providing services of trading, custody, transfer or issuance related to crypto assets." In fact, the Regulation, which consists of 6 articles in total, does not bring a comprehensive regulation, however gains importance as it defines crypto assets and is the first legal regulation on this subject.

Crypto assets defined as "intangible assets that are created virtually using distributed ledger technology or a similar technology and distributed via digital networks, but are not classed as fiat money, deposit money, electronic money, payment instrument, securities, or other capital market instruments." The usage area of the aforementioned definition is limited within the scope of the Regulation. Therefore, although a definition has been made, a broad definition that will expand the entire legal framework has not yet been included in our legal order.

In this regulation, it is stipulated that crypto assets cannot be used directly or indirectly in payments and the service for making these transactions cannot be provided. It is also prohibited for payment and electronic money institutions to act as intermediaries for platforms that offer trading, custody, transfer or issue services regarding crypto assets or for fund transfers from these platforms. The CBRT indicated the reasons such "cryptocurrencies are neither subject to any regulation and supervision mechanisms nor a central regulatory authority, their market values can be excessively volatile, they may be used in illegal actions due to their anonymous structures, wallets can be stolen or used unlawfully without the authorization of their holders, and transactions are irrevocable", in its press release dated April 16, 2021, as the reason for these restrictions made by the Regulation.9

  1. Approach of the Financial Crimes Investigation Board

Crypto asset service providers have become subject to the supervision of the Financial Crimes Investigation Board ("MASAK"), with the "Amendment to the Regulation on the Prevention of Laundering of Proceeds of Crime and the Financing of Terrorism" published in the Official Gazette dated 01 May 2021 and numbered 31471. MASAK has published the "Crypto Asset Service Providers Guide", with crypto asset service providers subject to control of the MASAK 10. This guide explains the obligations of service providers. Accordingly, the obligations of cryptocurrency service providers are listed as follows:

  • Customer recognition,
  • Suspicious transaction reporting, 
  • Providing information and documents,
  • Continuous reporting,
  • Retaining and submission.

According to the guide, obliged parties, who are cryptocurrency service providers, "are obliged to determine the identities of those who make transactions and those who are transacted on their behalf, to take other necessary measures before taking any action in the transactions made by them or intermediating them, thus determining the principles of recognizing their customers."  If there is "any information, suspicion that it is illegally obtained or used for illegal purposes, used by terrorists or those who finance terrorism for terrorist acts, or related to or connected with them", suspicious transaction will also be in question and obliged parties shall notify this situation to MASAK regardless of monetary limit. This notification must be made within 10 working days from the date of suspicion. Furthermore, obliged parties are obliged to provide all kinds of information, documents or records that will be requested from them. Finally, the obliged parties are obliged to inform MASAK about the amount to be determined by the Ministry of Finance from the transactions to which they are parties or mediated.

These obligations are also detailed in the Law No. 5549 on the Prevention of Laundering Proceeds of Crime, and if these obligations are not complied with, an administrative fine may be imposed by MASAK.

  1. Approach of the Capital Markets Board

In addition to the CBRT, the Capital Markets Board ("CMB") is one of the regulatory authorities in our country, which aims to determine the operating rules of capital markets and institutions and to ensure fair and effective functioning of the markets11. The CMB has made it clear that many of the practices for raising money, usually using blockchain technology, also known as the sale of cryptocurrencies, fall outside the CMB's regulation and oversight area, with regard to cryptocurrencies, as per its bulletin 2018/4212.

  1. Applicability of Property Law

When the subject is considered in terms of property law, although the concept of property is not clearly defined in the Turkish Civil Code, when the provisions on real rights are examined, it is stated that goods with physical existence gain the quality of property13. There is no consensus in the doctrine on whether cryptocurrency should be counted as a property. There are opinions that cryptocurrencies cannot be considered as properties, since they do not carry the element of material assets in terms of Turkish law14, however, there are also opinions that cryptocurrencies can be considered as properties since they can be used in daily life and transferred, in other words, and they can be evaluated within the scope of property rights15.

CONCLUSION

Cryptocurrencies, which has entered our lives as a new instrument, is mostly seen as an investment instrument, not as a payment instrument. This rapidly growing new international currency has not yet been fully regulated by countries. Legal regulations, with the contribution of technology, have remained in the background in the face of this rapidly developing sector. The rapid fluctuations in the market are one of the situations that cause states and regulatory authorities to approach this issue with prejudice.

Cryptocurrencies, which are not subject to a legal regulation, also bring some risks as they are not connected to any center. The recently enacted Regulation, on the other hand, covers only a narrow area and does not make a general definition of cryptocurrencies. The necessity of evaluating the disputes experienced within our classical legal system arises, however still the issue in question cannot be gathered under a clear denominator.  Nevertheless, as seen in the step taken by MASAK, the existence of cryptocurrencies will undoubtedly make itself felt more and more on our legal system, and it will bring important effects on our traditional legal rules.

Footnotes 

1 ÖZSOY, Ilker Mete, KRIPTO PARA VARLIKLARININ CEBRÎ ICRA YOLU ILE HACZI, Ankara 2019

2 MUTLUOGLU, Derya, KRI?PTO PARA BI?RI?MLERI? VE SUÇTAN KAYNAKLANAN MALVARLIGI DEGERLERI?NI? AKLAMA SUÇU, Ankara 2020,

3 ÇAKIN, Murat, KRIPTO PARALAR: BITCOIN, DÖVIZ KURLARI ve ALTERNATIF KRIPTO PARALAR ARASINDAKI ILISKININ INCELENMESI, Izmir, 2019

4 BILGILI, Fatih, CENGIL, Fatih, BITCOIN ÖZELINDE KRIPTO PARALARIN ESYA NITELIGI SORUNU

5 UYSAL, Ümit, KRIPTO PARA VE KRIPTO PARANIN TICARETTE KULLANIMI: GIRISIMCILERIN VE YATIRIMCILARIN KRIPTO PARAYA ILISKIN TUTUMLARININ INCELENMESI, Mugla, Temmuz,2019,

6 ALNIAÇIK, Baris, KRIPTO PARALARIN DÜNYA VE TÜRKIYE'DEKI GÜNCEL DURUMU ÜZERINE BIR INCELEME, https://dergipark.org.tr/tr/download/article-file/636852 , Date of Access: 01.06.2021

7 DURMUSH, Gülnara, KRIPTO PARA VE ICRA HUKUKU YÖNÜNDEN DÜSÜNDÜRDÜKLERI, Istanbul, 2019

8 ALNIAÇIK, Baris

9 CBRT press release dated April 16, 2021 https://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN/Main+Menu/Announcements/Press+Releases/2021/ANO2021-17 Date of Access: 02.06.2021

10 https://ms.hmb.gov.tr/uploads/sites/12/2021/05/Kripto-Varlik-Hizmet-Saglayicilar-Rehberi.pdf Date of Access: 02.06.2021

11 SERMAYE PIYASASI KURULUNUN OLUSUMU, https://www.spk.gov.tr/Sayfa/Index/0/0#:~:text=Sermaye%20piyasalar%C4%B1n%C4%B1n%20ve%20kurumlar%C4%B1n%C4%B1n%20i%C5%9Fleyi%C5%9F,adil%20ve%20etkin%20%C3%A7al%C4%B1%C5%9Fmas%C4%B1n%C4%B1%20sa%C4%9Flamakt%C4%B1r.  Date of Access: 02.06.2021

12 https://www.spk.gov.tr/Bulten/Goster?year=2018&no=42 Date of Access: 02.06.2021

13 DURMUSH, Gülnara

14 BILGILI, Fatih, CENGIL, Fatih

15 DURMUSH, Gülnara

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