Evaluation on Legal Status of the Cryptocurrency Trade in Turkey

2/4/2020

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Cryptocurrency trade has become a highly preferred investment type in recent years and the popularity of the said investment has considerably increased in Turkey as well. As it is known, since cryptocurrency is not a material type of fiat money and cannot be claimed ownership by any state or organization, its status and conformity to the law remained in a questionable dimension.
In addition to the trading of cryptocurrencies - which is encountered as a purchase and sale transaction in digital environment – they are also considered and used as a payment method in many countries. Within this scope the legal status of cryptocurrencies has become quite critical all over the world.

Turkish market has also had its share from this hype and the Turkish government is also considering and working on creating its own cryptocurrency nowadays. Therefore, the interpretation of cryptocurrency as per Turkish law has become more important. However, there is not any specific Turkish legislation regulating cryptocurrencies and other similar virtual currencies at the moment. On the other hand, the worldwide legislative background in this area is not any better. There is an extensive lack of legal regulation on this issue across the countries where cryptocurrency trading is permitted and promoted. It is still unclear how cryptocurrencies to be defined and treated under Turkish legal system (i.e. as a currency, security or commodity). Since there is no specific legislation on cryptocurrencies, insights, and clarifications have been tried to be provided by the statements made by the authorities. Despite the current turmoil, various scenarios may be coming up within the framework of legal interpretation regarding the companies or individuals that are getting involved in the purchase and sale transactions of cryptocurrencies.

The first argument is coming up with the clarification on the matter to decide whether Cryptocurrencies are fiat money, virtual currency, security, capital markets instrument, custody or economic asset. When we look at the explanations around the world, it could be seen that England attempts to define the status of cryptocurrencies and according to the final statements made it is assumed as a commodity under English law. If seen that way, we may also interpret cryptocurrencies as commodities which leads us to the Turkish Code of Obligations numbered 6098. On the other hand, it is also risky to conclude that cryptocurrencies are recognized as a payment instrument by Turkish Law though they are used for payment transactions in Japan and England. According to the statements made by Banking Regulation and Supervision Agency (“BRSA”) on 25.10.2013, BRSA has confirmed that cryptocurrencies are not within the scope of the "Electronic Money" definition as cryptocurrencies are not issued by an official and private institution, and thus, it is not subject to BRSA's supervision.

As per further declarations of the Central Bank of the Republic of Turkey (“CBRT”) in a separate occasion; CBRT has stated that cryptocurrencies cannot be classified as fiat money which needs to be issued by a central bank of the relevant country against a value even if such money can be called fictive. In this respect, even though cryptocurrencies can also find function as fiat money; they do not meet the criteria of having a legal basis and being issued under the guarantee and control of a government. Thus, it is not wrong to conclude that cryptocurrencies are not evaluated as fiat money in terms of the existing Turkish law and regulations.

Capital Markets Board of Turkey (“CMB”) published a report in December 2016 stating the possible place of cryptocurrencies under Turkish Law. This statement also proved the interest CMB takes in cryptocurrencies. Additionally, in the same report, CMB has stated that with calculating the risk around the subject and with taking careful steps Turkey can take a promising position in this field.

Until just a couple of months ago the Financial Crimes Investigation Board of Turkey (“MASAK”) was considering the transactions of cryptocurrencies as suspicious transactions. Nonetheless, MASAK has recently changed its approach and with the latest Suspicious Transactions Notification Guide cryptocurrency transaction are not deemed as suspicious anymore unless other motives are hidden under such transactions like money laundering etc. This way, MASAK has indicated that all purchase and sale transactions of cryptocurrencies shall not be defined as suspicious transactions on their own and transactions that are incompliant with the customer profile in terms of frequency and amount, and transactions with an unidentified source and incompatible with the financial profile of the customer shall be deemed as suspicious transactions.

To conclude, it can be stated that there are not any restrictions and declarations required for the possession or transfer of cryptocurrencies to and from Turkey. As in other countries, cryptocurrency is a gray-zone in Turkish Law. However, the newly adopted perspective of the Turkish authorities is promising. The Scientific and Technological Research Council of Turkey (“TÜBİTAK”) conducted the second national workshop on block chain and cryptocurrency in September 2019 whereby certain market news state that the Turkish government is planning to create its own cryptocurrency in association with TÜBİTAK, as an indicator of a positive approach to cryptocurrency trading. There are also further rumors that the government is planning to establish certain control mechanism on the cryptocurrencies and the intermediary companies through Capital Markets Board of Turkey for the safety of the investments as investor rights are not clearly defined and protected by the regulated laws. In the meanwhile, many worldwide recognized cryptocurrency trading platforms are extending their businesses to Turkey by establishing partnerships and providing Turkish currency transaction options with banks which will inevitably develop a regulatory environment as well as acceptance of cryptocurrencies as an investment platform and an alternative payment mechanism in Turkey.

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