Ece Dayıoğlu, FCIArb, FSIArb
June 2021
BITCOIN IN TURKISH AND EUROPEAN LEGAL SYSTEMS
The Beginning of Cryptocurrency and Blockchain Technology
As electronic commerce became widespread in the internet age we live in, it was desired to create an electronic currency, but since there is no control mechanism, the development of virtual money was prevented when the same data was tried to be used more than once, in other words, multiple expenditures were made (1).
Afterwards, with the emergence of crypto technology, a crypto money technology was created that is secured by special encryption methods, cannot be controlled by central banks, the sender is unknown and can be distributed with a digital signature or key (2). The first person to produce crypto money was Satoshi Nakamoto, and the first currency was Bitcoin, it was called the 1st generation blockchain.
Cryptocurrency and Blockchain Concepts
Cryptocurrency can be defined as digital data obtained as a result of encryption in electronic environment and expressing economic value (3). Blockchain, on the other hand, is an encrypted distributed database (4) consisting of blocks and is the infrastructure technology that enables crypto money to work (5). In other words, the blockchain is a ledger tool that facilitates the recording of transactions (6). Blockchain technology can also be described as distributed ledger technology, since an infinite number of copies are distributed among users from all over the world (7).
Token, Coin and Altcoin Concepts
Some of the subchains, which were established by being influenced by the blockchain system without a currency, use tokens (8). Tokens, which are cryptographic assets, represent assets (9). In other words, tokens are crypto assets that represent any asset other than crypto money and provide various rights to the holder (10). While the token is produced and distributed on a platform for a specific purpose, Coin means disposable money and can be transferred in a secure and transparent manner independent of the platform (11). Altcoin (alternative coin) is the name given to cryptocurrencies such as Ethereum, which is released as an alternative to Bitcoin (12).
Bitcoin
Bitcoin is a fully digital cryptocurrency that is not dependent on a central authority (13).
Privacy Aspect
The privacy element in the Bitcoin system is due to the fake anonymous identities of the participants. In other words, although the money transfer between the anonymous parties can be tracked, the confidentiality element in the system is ensured since the identity of the transaction parties is not known (14). Limited Amount of Bitcoin In the Bitcoin system, it is designed to supply 21,000,000 Bitcoins (15), and in case of an increase in demand, Bitcoin may increase in value due to the constant supply. Use of Bitcoin It provides ease of use by scanning the code in the Bitcoin digital wallet application to the phone screen.
Bitcoin in Turkish Legal System
Regulation on Not Using Crypto Assets in Payments (16) pursuant to provision 1, the purpose of the Regulation is expressed as follows:
“The purpose of this Regulation is not to use crypto assets in payments, not to use crypto assets directly or indirectly in the provision of payment services and issuance of electronic money, and to payment and electronic money institutions’ platforms that provide trading, storage, transfer or issue services regarding crypto assets or fund transfers from these platforms It is the determination of the procedures and principles regarding non-mediation.”
In accordance with the 3/1 provision of the same Regulation, the concept of crypto asset is defined as follows:
“In the application of this Regulation, crypto assets refer to intangible assets that are created virtually using distributed ledger technology or similar technology and distributed over digital networks, but that are not considered fiat money, fiat money, electronic money, payment instruments, securities or other capital market instruments.”
In accordance with the provisions of 3/2 and 3/3 of the said Regulation, it is regulated that crypto assets cannot be used directly or indirectly in payments and services cannot be provided for the direct or indirect use of crypto assets in payments.
In accordance with the 4 provisions of the Regulation, it has regulated that crypto assets will not be used in the issuance of electronic money in the provision of payment services:
“Payment service providers may not develop business models in which crypto assets will be used directly or indirectly in the provision of payment services and issuing electronic money, nor may they provide any services related to such business models. Payment and electronic money institutions cannot mediate platforms that offer trading, custody, transfer or issuance services for crypto assets or fund transfers from these platforms.
It is thought that this Regulation is restrictive in matters falling under the jurisdiction of the Central Bank of the Republic of Turkey, and this limitation is also valid for token and altcoin crypto assets included in the concept of crypto assets.
In accordance with the 3/ç provision of the Law No. 6493 on Payment and Securities Settlement Systems, Payment Services and Electronic Money Institutions, electronic money is issued against funds accepted by the electronic money issuer, stored electronically, used to perform payment transactions defined in this Law. It is defined as the monetary value that is accepted as a means of payment by real and legal persons other than the electronic money issuer. The electronic money institution within this definition is defined as the legal person authorized to issue electronic money within the scope of this Law pursuant to the 3/d provision.
It is understood from this definition that crypto money does not constitute electronic money within the scope of this Law.
The announcement made pursuant to the Decision of the Capital Markets Board Decision Body dated 27/09/2018 and numbered 47/1102 is as follows:
“Many of the practices for raising funds using blockchain technology, also known as “Cryptocurrency Sale” or “Token Sale”, fall outside the regulation and oversight of our Board. Digital asset sellers sell digital assets with specific (such as financing a project or company) or often vague promises. These digital assets can be bought with fiat money or by using cryptocurrencies such as Bitcoin and Ether. Although they can be divided into many different types in terms of design, digital assets usually represent a share in a company, a right to access a service, a real-life asset, a right to use a product or service. Information on the use of the money collected after the sales process is included in the “white-paper”, which is a document similar to the prospectus.”
Although there is no clearly prohibitive regulation in Turkish legislation yet, since it seems possible to commit the crime of laundering the assets arising from the crime regulated in the Law No. 6415 on the Prevention of the Financing of Terrorism, Law No. 5549 on the Prevention of Laundering of Proceeds of Crime and the Turkish Penal Code No. 5337, it is possible to commit the Financial Crimes through cryptocurrency. It should be accepted that digital money transfers that constitute a crime in terms of the legislation of the Financial Crimes Research Board are prohibited.
Bitcoin in European Legal Systems
In the European Union, electronic money is regulated by the Directive 2009/110/EC. The European Union Commission is of the opinion that the European Union legislation should be clarified with clear regulations in terms of blockchain-based applications. In this respect, it wishes to establish harmonized legislative provisions in the member states of the European Union (17).
Germany
The new Fund Settlement Law (Fondsstandortgesetz) is scheduled to come into effect on 01.07.2021, allowing local private funds in Germany to invest up to 20% of their portfolios in crypto assets such as Bitcoin, making it possible to add crypto assets to private funds. Crypto assets are expected to be legalized as an asset class (18).
Belgium
The Belgian Central Bank (Banque Nationale de Belgique) declared on 15.01.2014 that cryptocurrencies are not legal tender or electronic money (19).
France
In the announcement made by the French Ministry of Economy on 04.12.2020, it was noted that cryptocurrencies are not yet regulated by the legislation, therefore digital currencies and cryptocurrencies do not have clear legal status (20).
Netherlands
Bitcoin trading has not yet been regulated by the official financial authorities in the Netherlands and is not considered money in the context of the Dutch Civil Code. Bitcoin, which is not connected to a central system, is not considered as virtual money (21).
Switzerland
Cryptocurrency exchanges are legal in Switzerland as long as they are licensed and therefore regulated by FINMA (Swiss Financial Market Supervisory Authority). Exchanges, or more generally, VASPs (Virtual Asset Service Providers) are legal in Switzerland. Exchanges should do Advanced Due Diligence on AML (Anti-Money Laundering) and CFT (Fighting the Financing of Terrorism). Strict KYC (Know Your Customer) controls must be followed in relation to AMLA (Anti-Money Laundering Act) in Switzerland (22).
Overall
In the Turkish legal system, regulations regarding crypto money in order to protect the consumer and prevent money laundering are in the drafting stage with the work of the Ministry of Treasury and Finance, the Capital Markets Board, the Revenue Administration, the Central Bank and the Banking Regulation and Supervision Agency. It is expected that issues such as inspection and surveillance mechanisms in the purchase and sale of cryptocurrencies, license and minimum capital requirements for crypto asset companies, technical competence and the introduction of the Capital Markets Board license requirement will be included in the regulations. It is understood that there is no detailed crypto-asset regulation in general in European countries, but member countries are warm to such regulations. At this point, it is watched with interest which member countries will bring crypto-friendly regulations.
(1) Mehmet Can Yumuşaker, Kripto Para ve Tipleri, Bitcoin Olgusu ve Muhasebesi, Uluslararası Toplum Araştırmaları Dergisi, C. 12, 2019, Sa. 18, s. 1009.
(2) Yumuşaker, s. 1010.
(3) Fatih Bilgili, M. Fatih Cengil, Bitcoin Özelinde Kripto Paraların Ticaret Şirketlerine Sermaye Olarak Getirilmesi, Ankara Hacı Bayram Veli Üniversitesi Hukuk Fakültesi Dergisi, C.XXIII, 2019, Sa. 3, s. 4.
(4) Bilgili, Cengil, s. 4.
(5) Şahin Çetinkaya, Kripto Paraların Gelişimi Ve Para Piyasalarındaki Yerinin Swot Analizi İle İncelenmesi, Uluslararası Ekonomi ve Siyaset Bilimleri Akademik Araştırmalar Dergisi, C.2, 2018, Sa. 5, s. 16.
(6) Yumuşaker, s. 1011.
(7) Betül Üzer, Sanal Para Birimleri, Türkiye Cumhuriyeti Merkez Bankası Ödeme Sistwmlwei Genel Müdürlüğü, 2017, s. 21 vd.
(8) Abdurrahman Çarkacıoğlu, Kripto-Para Bitcoin Araştırma Raporu, Sermaye Piyasası Kurulu Araştırma Dergisi, 2016, s. 55.
(9) Filiz Yüksel, Kripto Varlıklar ve IFRS Kapsamında Kripto Paraların Muhasebeleştirilmesi, Muhasebe ve Vergi Uygulamaları Dergisi, C. 13, 2020, Sa. 2, s. 432.
(10) Yüksel, s. 438.
(11) https://www.burcinyazici.com/coin-token-ve-altcoin-nedir-farklar-3646.html/
(12) https://www.burcinyazici.com/coin-token-ve-altcoin-nedir-farklar-3646.html/
(13) Yumusaşer, s. 1012.
(14) Üzer, s. 43 vd.
(15) Ayşe Esra Pirinççi, Yeni Dünya Düzeninde Sanal Para Bitcoin’in Değerlendirilmesi, Uluslararası Ekonomi Siyaset İnsan ve Toplum Bilimleri Dergisi, 2018, Sa. 1
(16) R.G. 31456 16.04.2021
(17) https://digital-strategy.ec.europa.eu/en/policies/regulatory-framework-blockchain
(19) https://www.nbb.be/fr/articles/attention-largent-virtuel-comme-bitcoin
(20) https://www.economie.gouv.fr/particuliers/cryptomonnaies-cryptoactifs#
(21) https://www.lawyersnetherlands.com/open-a-cryptocurrency-company-in-the-netherlands
(22) https://www.coinfirm.com/blog/switzerland-crypto-regulations/