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THE LEGAL STATUS OF CRYPTOCURRENCIES IN THE TURKISH LEGAL SYSTEM

Güncelleme tarihi: 27 Şub

Ahmet Sami Demirezici

Bilkent Üniversitesi Hukuk Fakültesi



INTRODUCTION

Since the appearance of cryptocurrencies in 2009, their legal status has been

debated in all world doctrines of law. Nevertheless, except for a few countries, the legal status of cryptocurrencies is not definite in most jurisdictions (Bolotaeva et al. 2). Turkey is also one of the countries that have not yet determined the status of cryptocurrencies in the legal hierarchy under its laws. Unfortunately, there is no specific law, regulation, or court decision ascertaining their legal status (Üzümcü and Yıldırım 273). There are only academic arguments about the legal status of cryptocurrencies in its doctrine. In the doctrine, it is defended that the legal status of cryptocurrencies is fiat money, electronic money, security, or property. Yet, due to the unique and mismatched legal character of cryptocurrencies, these arguments cannot be accepted as valid under the scope of the Turkish Legal Framework.


I. MONEY

Money has three functions that are applied to define itself. It is used as a medium

of exchange, a unit of account, and a store of value in daily life (“What is money?”). In

Despite being a controversial issue, it is generally accepted that cryptocurrencies do not carry out these three functions accurately. The reason is that they are not admitted as a general payment method worldwide for functioning sufficiently as a medium of exchange and stable enough to act as a unit of account due to fluctuating demand and inflexible supply without an authority that can manage the supply to maintain a constant value (Ammous 26, Bakkaloğlu and Yılmaz 47). Yet, although cryptocurrencies do not operate as money in practice, it is still examined if cryptocurrencies fill the legal status of money. In the doctrine, three types of money are applied to investigate the legal nature of cryptocurrencies: fiat money, electronic money, and virtual money. Even though cryptocurrencies are accepted as a type of virtual money according to the dominant academic viewpoint (Özdemir 292, Üzümcü and Yıldırım 273), since virtual money is not

regulated in most jurisdictions and do not have specific legal status as a result of it (European Central Bank 13), they are not examined detailedly as being of interest in this article.


A. FIAT MONEY

In a broad sense, fiat money is defined as all kinds of money which are made legal

tender by a government decree or regulation. The term is, nevertheless, generally referred to legal tender banknotes and coins having face values exceeding their commodity values and not being redeemable in a commodity, like gold or silver (“fiat money”). In the jurisdictions of various countries, cryptocurrencies are not recognized as fiat money due to not being in physical shape and not being issued by Central Banks or other organs of the governments. Turkey is also one of these countries that does not recognize them as fiat money. Article 3(1) of CBRT’s Regulation on the Disuse of Crypto-Assets explicitly

states that cryptocurrencies are not classed as fiat money. Furthermore, Article 3(2) of the Regulation also states that they cannot be used directly or indirectly in payments. Thus, it seems that cryptocurrencies cannot benefit from the legal status of fiat money in the general sense. Yet, with the examination in the legal sense, it is also significant to clarify which meaning of fiat money mentioned above is used in the CBRT’s Regulation. The reason is that some cryptocurrencies might benefit from “foreign currency” status in the legal context following the use of the narrow definition of fiat money in the Regulation, because some countries accept some cryptocurrencies as legal tender, like the case of Bitcoin in El Salvador and Central African Republic (Browne). Nonetheless, by prohibiting the use of cryptocurrencies as a payment method in Article 3(2), it is comprehended that

the broad meaning of fiat money is applied in the Regulation. As a result, there is no

chance for cryptocurrencies to be classed as fiat money in accordance with the context of the Regulation (Bilgili and Cingil).


B. ELECTRONIC MONEY

Similar to the definition of the European Central Bank, Turkish Law defines Electronic

money in Article 3(ç) of Law (No. 6493) as “ monetary value which is issued on the receipt of funds by an electronic money issuer, stored electronically, used to make payment transactions defined in this Law and accepted as a payment instrument also by natural and legal persons other than the electronic money issuer”. Even though being stored electronically makes e-money similar to cryptocurrencies, some differences are rendering differences in the process of issuing these items. There are some legal and monetary requirements that e-money issuers must provide according to Law (No. 6493), while cryptocurrency issuers should not require them. For instance, e-money issuers must provide a sufficient fund of money for each par value of e-money issued, which also reveals that e-money is backed by fiat money. In contrast, cryptocurrency issuers can issue their cryptocurrencies without the requirement of allocating funds or any other

commodity. As another requirement, only the specific institutions (The banks operating pursuant to Law No. 5411, Postal & Telegraph Corporation, and the electronic money institutions) mentioned in Law (No. 6493) can issue e-money with the requirement of obtaining permission from The Banking Regulation and Supervision Board, while cryptocurrency issuers can freely issue without being under any supervision or the necessity of getting permission from an authority. As can be seen, cryptocurrencies cannot be recognized as electronic money under the apparent incompatibility of the legal nature of both items. With the precise prohibition of the CBRT’s Regulation on using cryptocurrencies as a payment method and classifying them as electronic money, there is

no opportunity to protect cryptocurrencies by giving them the legal status of electronic money.


II. SECURITY

In the literature on Economy, securities are defined as financial assets (like stocks

or bonds) that can be purchased and sold in a financial market (Hubbard and O’Brien937). Nonetheless, the Turkish legal system makes its own separate definition in order to facilitate determining their legal character and usage. The new Capital Market Law (No.6362) defines securities under Article 3(o) by elaborating their types. Yet, since the definition in the old Capital Market Law does not determine the legal characteristic and conceptual boundaries of securities, the doctrine accepts the definition in the old Capital Market Law (No. 2499) as the legal definition of securities (Adıgüzel 3, Üzümcü and Yıldırım 277). The old Capital Market Law defines it under Article 3(b) as “Negotiable instruments which, represent a share or participation in the property of the issuer or an obligation of the issuer, represent a specified quantity of money, are of a series of instruments of the same nature, have the same wording, are dealt in as a medium for investment, are fungible, earn periodic income and have the terms and conditions determined by the Capital Market Board.” As can be observed, cryptocurrencies do not represent a share or participation in a property or an obligation. Furthermore, they do not

fulfil the other qualifications of securities mentioned in Article 3(b) (Üzümcü and Yıldırım 277). Since it is also stated in the CBRT’s Regulation on the Disuse of Crypto-Assets that cryptocurrencies are not classed as securities, it does not seem possible to grant cryptocurrencies the legal status of securities.


III. PROPERTY

Property is defined as any items that a person or an entity can own (“property”). In

other words, it is defined as anything objected to the ownership rights. In the Turkish legal system, properties are classified under three categories: movable properties, immovable properties, and intellectual properties. Cryptocurrencies are not acknowledged as immovable properties because they are not one of the items stated under the scope of Article 704 of the Turkish Civil Code. They are also not perceived as intellectual property for their users, excluding the inventors of a specific cryptocurrency or its mechanism, due to not being created as a result of an invention (Kapancı 172). Yet, it is actually debated whether cryptocurrencies are acknowledged as movable property in the doctrine. There is no certain legal definition for movable properties in Turkish Law because of not having the

definition of properties in the legislation (Bilgili and Cengil 18, Özdemir 298). Moreover,

movable properties are also not counted in the Regulation on the Disuse of Crypto-Assets as one of the legal statuses that cannot include cryptocurrencies. Nonetheless, Article 762 of the Turkish Civil Code only makes material movable items and natural sources suitable for acquiring the subject of movable property. Besides, Turkish legal doctrine, such as Swiss and German doctrine, requires strictly to carry out the features of being corporeal, possesable, non-personal, shaped and definite in order to become movable property (Bilgili and Cengil 11, Özdemir 299). Since cryptocurrencies are incorporeal, the doctrine does not defend the protection of the cryptocurrency users’ ownership rights under the legal status of movable properties. However, it is defended by some academics in the doctrine that cryptocurrency owners can benefit from ownership rights by making an analogy (Bilgili and Cengil 21, Özdemir 302).


CONCLUSION

After the examination of academic arguments in regard to the legal status of

cryptocurrencies, it is concluded that cryptocurrencies cannot be accepted as fiat money, electronic money, security, and property in Turkish law. Thus, it is also concluded the legal status of cryptocurrencies remains ambiguous in the Turkish legal system. Under these circumstances, it is still uncertain how the economic and legal disputes arising from the complexity of cryptocurrencies should be resolved. With the law presented to Parliament in the following weeks, cryptocurrency-related problems are assumed to be settled (Özkan). Unfortunately, until Parliament enacts this law, it seems that the disputes arising

from this legal ambiguity will remain unresolved.


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