Cryptocurrencies have been the subject of significant developments and debates regarding their legal status and involvement in transactions. The emergence of cryptocurrencies, driven by advancements in technology and information, presents a unique challenge to the existing legal framework, raising numerous questions. In this article, Unal&Partners Law Office will provide a detailed analysis of the legal status of cryptocurrencies, their position in Turkish legislation, and their involvement in legal transactions.
What is Cryptocurrency? Advancements in technology have brought about significant changes affecting the economy, and one of the most noteworthy is the global emergence of cryptocurrencies as a new form of currency. Although known for being free from the control of any institution or organization, cryptocurrencies are preferred due to the ease of transfers, simplicity of buying and selling, and low costs.
These virtual currencies are created using a technology called blockchain, lacking any physical form and not subject to the oversight of a central authority or public institution. The introduction of cryptocurrencies into the market has sparked various legal debates. While there is currently no specific legal regulation concerning cryptocurrencies, it is anticipated that governments will introduce legal frameworks, at least within their own borders, in the future.
Legal Status of Cryptocurrencies From the perspective of Turkish law, it is appropriate to state that there are no fully defined concepts for cryptocurrencies and, in this context, Bitcoin. The areas where cryptocurrencies most closely align with existing definitions are as follows:
As Money: According to the Turkish Code of Obligations, money must bear the elements of being released into circulation by a country and accepted by the competent authorities of that country. Since cryptocurrencies have an independent nature not tied to any country or authority, they do not fall within the current definition of money.
As Electronic Money: Electronic money is regulated under Law No. 6493 and must be issued by individuals authorized by the Central Bank of the Republic of Turkey. However, the Banking Regulation and Supervision Agency has stated that Bitcoin and other cryptocurrencies cannot be considered electronic money.
As Property: The Turkish Civil Code does not define the concept of property, but there are views suggesting that it should be a tangible asset. As cryptocurrencies lack tangible existence, it is challenging to classify them legally as property.
As Securities: Law No. 6263 defines securities, but cryptocurrencies do not fall under this definition.
The inadequacy of Turkish legislation in defining cryptocurrencies creates uncertainty about how they will be evaluated and which regulatory authority will be applicable. It is likely that the Capital Markets Board will take steps in this direction in the near future.
However, the absence of specific regulation in Turkish law does not imply that cryptocurrencies cannot be subject to legal transactions. The widespread use of these currencies, particularly in major corporate transactions, may lead to legal disputes. Therefore, regulations related to cryptocurrencies are evolving within the framework of legal precedent, judicial decisions, practice, and legal doctrine.
Involvement of Cryptocurrencies in Legal Transactions There are debates about whether cryptocurrencies can be included in contracts, given that Turkish law has not fully incorporated cryptocurrencies into a specific legal domain. The non-inclusion of cryptocurrencies in a particular area of Turkish law requires case-by-case evaluations.
Inclusion in Contracts: The fundamental principle accepted in Turkish law is the freedom of contract. Parties can freely determine the terms of the contract as long as they do not violate morals, public order, or personality rights. Therefore, it is possible for Bitcoin or another cryptocurrency to be included as the counterperformance in a contract. However, it is likely not to be legally recognized as a payment obligation because it will be considered a unique performance.
Regarding this matter, the Regulation on the Non-Usage of Crypto Assets in Payments, published in the Official Gazette on April 16, 2021, aims to prohibit the direct or indirect use of crypto assets in payment and the provision of services in this regard by payment and electronic money institutions. The regulation is prepared based on the relevant articles of the Central Bank of the Republic of Turkey Law. According to the regulation, a crypto asset refers to intangible assets created virtually using distributed ledger technology or similar technology and distributed through digital networks, not classified as legal tender, registered money, electronic money, payment instrument, security, or other capital market instruments. The regulation prohibits the use of crypto assets in payments and the provision of services in this regard. Payment service providers and electronic money institutions cannot collaborate with platforms providing services related to the buying and selling, storage, transfer, or trading of crypto assets. The regulation entered into force on April 30, 2021, and its implementation is the responsibility of the President of the Central Bank of the Republic of Turkey.
Execution Proceedings Involving Cryptocurrencies The possibility of initiating execution proceedings against cryptocurrencies should also be evaluated. Considering that cryptocurrencies have measurable values and are not legally immune from seizure, it can be argued that the cryptocurrencies owned by a debtor can theoretically be seized.
When a seizure notice is sent to the account where the debtor's cryptocurrencies are held, the bank examines the account and enforces a seizure based on the equivalent amount in Turkish Lira of the cryptocurrencies held there. Domestic cryptocurrency exchanges in Turkey provide information about the debtor's cryptocurrency assets based on a letter sent under Article 89 of the Execution and Bankruptcy Law. Using this information, the value of the debtor's cryptocurrency assets is determined, and the seizure process is applied.
However, it is crucial to note the lack of regulation regarding the identification of funds on foreign cryptocurrency exchanges and the absence of international cooperation. While the equivalent value of cryptocurrencies can be subject to execution in Turkish Lira, it should be kept in mind that cryptocurrencies cannot be subject to bills of exchange, checks, and similar instruments, as these are specific to monetary claims.
Inheritance of Cryptocurrencies The fact that cryptocurrencies have not been clearly categorized does not mean that they lack "value." Therefore, it is accepted that the quantity of Bitcoin and other cryptocurrencies can be inherited. However, to include information about cryptocurrency wallets/passwords in inheritance agreements, individuals may need to find a way. It is also essential for the ownership of cryptocurrency within the blockchain system to be appropriately arranged concerning death.
The relationship between cryptocurrencies and legal regulations and transactions is becoming increasingly important. The lack of a comprehensive definition in the Turkish legal system leads to uncertainties in this field. However, Unal&Partners Law Office guides our clients in understanding the legal aspects of cryptocurrencies and closely monitors developments. If you need more information or legal advice on this matter, please feel free to contact us.
Unal & Partners Legal Team
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