Apart from Bitcoin; Ethereum, Tron was created to buy games and the characters of the games on the online market, Ripple being created for the cheap transactions between the Banks, Einsteinium being created to promote the science, and lots of other different Altcoins have been created every day. Although this cryptocurrency market has been damaged because of tax debates, prohibition declarations by the States and speculative transactions on the market, it is still a big and developing market. In that respect, as the economists are discussing, it is apparent that the money will be totally digitalized in future.

In the current situation, the cryptocurrencies are produced on the Blockchain system. This system has an anonym character on which the users are combined to each other and for this reason there is no central power. In the case of money transfer from a defined account to one user, the computer systems of the other users check whether there is money in this defined account and the money is transferred after getting approval from these other users’ systems.1

What the main differences between the traditional currencies and cryptocurrencies is a vital question on this writing. One of the biggest differences is that cryptocurrency is not bound to the central system. In addition, for the transactions of the currency, a trusted intermediary is necessary whereas it is not necessary for the cryptocurrency. The transactions are anonym and not based on any person or authority. For this reason, there is no need to obtain permission from any authority to make transactions of the cryptocurrencies and there is confidentiality on the accounts which is very important for safety.2

Although lots of countries do not acknowledge the cryptocurrencies and the crypto market, some companies pay the wages to their employees with Bitcoin and some companies accept online shopping with this cryptocurrency.

Moreover, Japan accepted last year Bitcoin as a legal currency and Russia has made some effort to legalize Bitcoin and Ethereum in its market.3 In addition, the Australian government began in 2017 to debate a bill that would apply against anti-money laundering of the cryptocurrency.

Furthermore, there is a big debate on the criminal charges of the exchange transactions without a license. Moreover, the government removed double taxation on Bitcoin, which was a result of 2014 dated decision accepting cryptocurrency as a bartered good rather than a currency.

Apart from Australia, Canada is one of the first countries to draw up Bitcoin legislation.

The government states that Bitcoin is not still a legal asset but the government deems that Bitcoin transactions are taxable depending on the type of activity.

Concerning the European Union, it can be said that the Union has been taking a cautious approach to the cryptocurrency, but it has been trying to find a solution to legalize the cryptocurrency without creating a legal and economic conflict. In that respect, the European Central Bank ("ECB") has been trying to have tighter control over the movements of digital currencies to apply a broader crackdown on money laundering. Within this context, ECB stated in 2017 that it did not see

Bitcoin as a threat and confirmed that Bitcoin was not mature enough for any regulation.4 It is apparently understood from this sentence that ECB is waiting the position of the cryptocurrency in the future and will act according to its economic position. As important information, the parliament's members voted in 2018, by a large majority, to support the December 2017 agreement having measures against money laundering and terrorism financing via cryptocurrency.

Apart from the European Union, with USA being the most important country in the world finance market it must be investigated on this writing. Due to the fact that the USA is a federal state, there are legal differences within each state. For instance, New York allowed in 2015 the BitLicense granting Bitcoin sectors to operate within this city. In addition, in 2017 Washington passed a bill that is applied to the Bitcoin exchange and transmission transactions.

In the federal level, the Commodities Futures Trading Commission (“CFTC”) has been giving its designation of the cryptocurrency as a commodity having economic value. Within this context, CFTC has drawn up comprehensive Bitcoin regulations and recently is focusing on the monitoring to the futures market. Within this context, there is an important case to prevent Bitcoin from illegal transactions.

In that case, drugs had been sold on the e-commerce website on the deep web via Bitcoin and this website was prevented in 2013 by the authorities5 with the founder of the website punished.6 Moreover, what is the most important part of this decision is that the district court has decided that Bitcoin is a currency.7 In the light of this information, it is apparently seen that lots of foreign countries have been trying to legalize the cryptocurrency and to monitor the transactions of these currencies. According to Turkish banking regulations, there is no positive Article or prohibition regarding to the cryptocurrencies. In addition, there is no regulation on this issue in the Turkish Criminal Law with the 5237 number as well. For this reason, there is no punishment on the acts of stealing the cryptocurrencies and on the other unlawfully acts against this market, because of legality principle of the criminal law. However, there is a need to regulate this huge market in the Criminal Law, Banking Law, Tax Law and the other related Laws.

Otherwise it could be easily foreseen that unlawful acts, victimizations, tax loss of the State would frequently occur and the market would be delivered directly to the speculative acts. However the Turkish government stated that there would be no tax regulation on the cryptocurrency8. In that respect, due to the fact that there are legality and clarity and definiteness principles in the tax law in Turkey, taxing acts on the values being not regulated in the Law by the state would be a breach of the proprietary rights of the citizen.9

Therefore it is not rightful to tax the profits of Bitcoin transactions in the current situation. Moreover, as a positive improvement, Bitcoin ATM Machine was set up last year in İstanbul Atatürk Airport allowing passengers to convert their money into cryptocurrencies as one-sided.

Furthermore, the Article 3/ç of the Code, with the number 6493, regulates the definition of the electronic money. There has been a big discussion on whether this definition involves cryptocurrencies or not. However, The Banking Regulatory and Supervisory Agency (“BDDK“) made an important statement that this Article did not involve cryptocurrencies and warned the cryptocurrency users about the results of the transactions. When the definition of electronic money is analyzed, it can be stated that there is a legal entity necessary for the transaction of electronic money. In addition, all electronic money should be issued in exchange of funds, and the legal entity should obtain permission from the authority to issue the money. However, as it is stated, Bitcoin is based on open-sourced software and has no central authority or does not need any authorization. For this reason, if 6493 numbered Code would not be changed, Bitcoin and the other Altcoins could not be accepted as electronic money in the current situation. Furthermore, Article 3/o of the Turkish Capital Market Code with the number 6362 regulates securities.

The question is whether cryptocurrencies can be assumed as securities or not. Although this issue is in controversy, it is apparent that they cannot be assumed as securities in Turkish Law, because Bitcoin and Altcoins do not represent a particular share or cannot be regarded as means of borrowing.

According to the Suspicious Transaction Types Guide published by the Financial Crimes Investigation Board (“MASAK"), the transfer transaction of the money to the financial intermediary to buy Bitcoin is one of the examples of suspicious transaction.10 In addition, there is a big problem about the taxation of the profits on this market in all of the countries including Turkey. Despite the fact that USA does not legally recognize the cryptocurrencies, it accepts the profits of the cryptocurrencies as assets and collects tax on them. As to the Turkish Tax Law, there is a big discussion about this issue. Some writers state that the tax can be collected according to the Article 37 of the Turkish Income Tax Law with the number 193, but a specific regulation and supervision is needed for this crypto market to collect the taxes.

The other issue for Bitcoin and Altcoins is mining. It is apparent that mining is not an illegal transaction. Mining is a producing act by using the computer operation power. In the past, all computer users could mine via their own computers, but now these transactions are made via huge computers. Within this context, a big sector has occurred in the whole world. There are even some firms operating on only mining transactions via their high computing power. Due to the fact that Bitcoin is not an illegal asset and there is no punishment on the transactions, mining is not an illegal act as well. However there is tax law and corporate law gaps in the current situation for firms operating on mining.

In the light of this information, the biggest problem on this issue for all of the countries is, whether regulation is necessary for this huge economic market since Blockchain system cannot be controlled by a central power. The problem on this issue is that states prefer only to regulate the transactions on which they have control, because there could otherwise occur big problems in the enforcement of the law. In this respect, Turkish government should firstly make definition of Bitcoin and Altcoins, and after that regulate their transactions. As the foreign doctrine states that governments should accept the reality of the cryptocurrencies and regulate businesses on which Bitcoin and the other cryptocurrency transactions are fulfilled and control this market without rejecting the reality. Otherwise, law-abiding citizens who transact in cryptocurrencies including Bitcoin can get damages unlawfully.11

References

  1. Jonathon B. Turpin, Bitcoin: The Economic Case for a Global, Virtual Currency Operating in an Unexplored Legal Framework, Indiana Journal of Global Legal Studies, Vol. 21, No. 1 (Winter 2014), p. 340.
  2. Sönmez Asıman, Sanal Para Bitcoin, The Turkish Online Journal of Design, Art and Communication (TOJDAC), July 2014, Volume 4, Issue 3, pp. 11–12. http://tojdac.org/tojdac/VOLUME4-ISSUE3_files/tojdac_v04i301.pdf
  3. Madhvi Mavadiya, Putin And Ethereum: A Match Made In Fintech, Forbes, 29 August 2017. https://www.forbes.com/sites/madhvimavadiya/2017/08/29/putin-ethereum-fintech/#213741096b5c
  4. Arjun Kharpal, Cryptocurrencies like bitcoin are not mature enough to regulate, ECB chief Mario Draghi says, CNBC, 19 October 2017. https://www.cnbc.com/2017/10/19/cryptocurrencies-are-not-mature-enough-ecb-chief-mario-draghi.html
  5. Andy Greenberg, Alleged Silk Road Creator’s Lawyer Denies Bitcoin Is Monetary Instrument, Moves To Drop All Charges, Forbes, 1 April 2014. https://www.forbes.com/sites/andygreenberg/2014/04/01/alleged-silk-road-creators-lawyer-denies-bitcoin-is-monetary-instrument-moves-to-drop-all-charges/#a4742113d672
  6. Ross Ulbricht: Silk Road creator convicted on drugs charges, BBC News, 5 February 2015. http://www.bbc.com/news/world-us-canada-31134938
  7. United States District Court, Eastern District of Texas, Sherman Division, Securities and Exchange Commission v. Shavers and Bitcoin Savings and Trust, No. 4:13-CV-416 (E.D. Tex. 2013). http://www.law.du.edu/documents/corporate-governance/securities-matters/shavers/SEC-v-Shavers-No-4-13-CV-416-E-D-Tex-Sept-18-2014.pdf
  8. Sebahattin Zeyrek and Mustafa Dermencioğlu, Ekonomi Bakanı Zeybekci’den Bitcoin açıklaması, Anadolu Ajansı, 30 December 2017. https://www.aa.com.tr/tr/politika/ekonomi-bakani-zeybekciden-bitcoin-aciklamasi/1018941
  9. Erkin Gözde, Vergilendirme Yetkisinin Tabi Olduğu Anayasal İlkeler, Ankara Barosu Dergisi, 2012/3, pp. 235–249.
  10. Mali Suçları Araştırma Kurulu, Şüpheli İşlem Bildirim Rehberi. http://www.masak.gov.tr/userfiles/file/rehber1_1/MSK-RHB-%C5%9E%C4%B0B-001-1_1.pdf
  11. Jonathon B. Turpin, Bitcoin: The Economic Case for a Global, Virtual Currency Operating in an Unexplored Legal Framework, Indiana Journal of Global Legal Studies, Vol. 21, No. 1 (Winter 2014), p. 335.