Miran Legal

Attorney

21.11.2022

Cryptocurrency İn Turkish Law

Cryptocurrency is a virtual and digital currency. Cryptology is utilized at the production stage of this currency, which is not tied to any country, state or central bank. The word "Cryptology" means "scientific study of ciphers". In the cryptocurrency system, cryptology plays a role in converting user and account information into code. There are virtual wallets and passwords in the cryptocurrency system. The security of users' accounts is provided by virtual codes. Receiving and processing information within the system depends on the created security circle being opened by the relevant person. The value changes of cryptocurrencies are completely up to the supply-demand ratio of users.

 

            The cryptocurrency circulates in the market as a digital currency. It is purchased from the relevant trading platforms through real money. Users can transfer and sell the cryptocurrencies they have. There are two elements that are needed to acquire cryptocurrencies: an Account and a Wallet. However, this leads to criminal acts such as phishing.

 

            Phishing means the theft of important personal data such as credit cards, identity information of users in a malicious manner by some people, institutions or organizations. The concept of phishing in the cryptocurrency market is carried out in through fake Internet sites or sending emails to users. The purpose is to get the user to enter their account information on the fake website and then a cyber attack will occur by hacking the account. Although the provision titled Misuse of bank and credit cards contained in Article 245 of the Tenth Chapter of the Turkish Criminal Law(TCL) is about phishing, the article states “seizing or possessing a bank or credit card belonging to someone else” is needed in order for it to be a crime. However, it would be contrary to the usual flow to seek the realization of such a condition in the cryptocurrency market. Currently, each user's wallet is stored in a virtual environment. In this case, since the crime is not connected to a physical credit or debit card, it can be concluded that the relevant article of the law falls behind in current developments. This is just one of the reasons that prevent cryptocurrencies from being widely used in everyday life in Turkey.

 

            There is no legislation or regulation in our country regarding cryptocurrencies and the rights of its users yet. However, in accordance with “Regulation on the Non-Use of Crypto Assets in Payments” published in the official gazette on 04/16/2021, a regulation has been made about not using cryptoassets in payments, not using cryptoassets in transfering e-money directly or indirectly, and not being a mediator for the platforms which give services on purchasing, selling, storing, transfering cryptoassets payment and e-money institutions. Therefore, in accordance with this Regulation, the use of cryptocurrencies in our country is severely restricted.

 

            The purchase and sale of cryptocurrencies, their instantaneous rise and fall and the tracking of these changes constitute the cryptocurrency market. However, the fact that cryptocurrencies are not affiliated with any authority, central bank or state administration causes trust problems for users. Many issues such as whether these coins should be considered assets in our daily lives, their place in our legal system, how their taxation will be, whether they will be inherited are discussed in the doctrine. As cryptocurrencies become widespread and countries begin to include them into their legislations, these questions will be able to get answers. However, it is quite difficult to say that governments have a positive attitude towards cryptocurrencies that are not under their sovereignty. Instead, it seems that they prefer regulating their self-made digital coins which they can control. The main reason here is to reduce the informal economy, to meet the public's demand for digitalization, and to establish authority and sovereignty over all types of money.

 

            In light of all these,it can also be said that it is possible for cryptocurrencies to be legally discussed within the scope of property rights. Property right is mentioned in Article 35 of the Constitution, which states: “Every person has property and inheritance rights. These rights may be limited by law only for public welfare. Exercising the right of property cannot be detrimental to public welfare." Considering the wording of the law, it is envisaged that property right is a constitutional right and it is possible to limit it by law only for public welfare.

 

            Property right also contains a parallel agreement with our Constitution in art.1 of the European Convention on Human Rights Protocol No. 1. Which is; "Protection of property: Every natural or legal person has the right to use their properties/assets without interference. No one shall be deprived of their property, unless it is for public welfare and justified by the law and international law.” . The rest of the article is more detailed compared to the Constitution. It emphasizes that the right of the State to tax and audit will continue in any case by stating: “However, the provisions above shall in no way prejudice the authority of a State to enact laws of such nature as it deems necessary to control the use of property in accordance with the general interest or to ensure the payment of taxes or other contributions/obligations or fines.”. 

 

            In light of these two regulations, the issue of whether cryptocurrencies can be put under property rights within the framework of Turkish law comes up. Considering the fact that crypto currencies are purchased using real currencies and transferred to a wallet located in a user's account where credentials are registered, it is possible to say that this qualifies as a sales contract. A sales contract ,simply, is a contract in which one party is obliged to transfer ownership of the properties subject to the contract to the other party while the other party is obliged to pay some money in return. If the subject of the contract is cryptocurrency, it can be assumed that the property right passes to the buyer, that is, to the user, by providing a corresponding price.

 

            In Turkish law, there is a rule which states that an item that is not tangible, three-dimensional or possible to be owned by someone cannot qualify as a property. In contrast, cryptocurrency continues to exist on a completely virtual environment. However, although they are not tangible, it is possible for someone to own them. Every user exchanges virtual currency for a certain amount of money and stores the virtual currency in their individual wallet. Due to today's developing technology, it is necessary to change and revise the laws in accordance with this development.

 

            Although the use of cryptocurrencies as a means of payment is restricted in our country in accordance with the Regulation on the Non-Use of Crypto Assets in Payments; There is no provision preventing the confiscation of crypto currencies. Therefore, being able to confiscate cryptocurrencies is one of the proofs that they partly qualify as a property. As a matter of fact, confiscation of cryptocurrency assets will be carried out in accordance with Article 89 of Bankruptcy and Enforcement Law. 

 

Within the framework of art. 89 of the law; for the confiscation of cryptocurrencies, a notice is sent to the intermediary where the debtor's cryptocurrencies are processed. If the intermediary has cryptocurrency belonging to the debtor, they are obliged to inform of its existence and amount in their response to the notice. In this case, the amount of the debtor's cryptocurrencies to cover their debt will be confiscated. The discussion in the doctrine about this issue is at what current exchange rate the cryptocurrency will be converted into TL if it is confiscated. Because the market value of cryptocurrency is constantly in a state of change. However, the best legal solution is to make the transaction based on the exchange rate on the day the notification reaches the intermediary.

 

CONCLUSION

The issue of cryptocurrencies' rights as properties has just started to be discussed in the field of law. For reasons such as the lack of any detailed legislation on cryptocurrencies and the fact that they are not legally reliable, cryptocurrencies are only used as an investment in most countries. Therefore, the legal identity of cryptocurrencies is being currently discussed in the doctrine and various opinions are presented. In this article, a legal approach has been adopted in terms of how cryptocurrencies can be subject to property right and their qualification as property.