However, having such a dense modern society comes with its own problems. Foundations of the many modern legal systems are from the legal system of Rome, which is a country with densely populated areas like the capital Rome. Because the need for rules comes from human relations and obviously, high-density places will create more human relations, eventually evolve to create new kinds of relations. Likewise, our modern society has much denser areas and as the world becomes smaller by developing transportation technologies, now we are dealing with much more human relations than before. Therefore, the rules become much more complicated which eventually increased the necessity of people who practice law, which we call lawyers. The term lawyer here involves not only attorneys but also judges and prosecutors. All these factors are the reasons why we have rules -in other words, law- and why we need them.

However, having rules are not enough, we need to find a way to enforce them. That is the point where our legal system comes in. For many centuries, these rules have been enforced by states. Indeed, modern societies have free courts to enforce these rules but establishing such a legal system and making it work have financial costs which must be covered. The judges, enforcing agencies, prisons, and many more expenses should be paid. As you know, all these costs and expenses require individuals’ who seek justice by using this legal system involvement. It means that if you do not have money to spare to take legal action, you cannot defend your rights and bring justice to society.

The biggest cost for individuals in the legal system is lawyer fees. You need to pay your attorney's fee and your payments should help the state to cover the fees of judges and prosecutors. Because there is a cycle that increases these costs:

As society has more human and thus, human relations à rules become more complicated and thus, being a lawyer becomes a harder job à as the job become harder, the number of people who can will, and/or want to do that decrease (otherwise the quality of work decrease and it does not help with providing justice) à as the quantity of lawyer decrease, cost of a lawyer increase.

Other expenses like electricity bills are a mere flea compared to the lawyer costs. Certainly, there are some methods states follow like financial aids, pro-bono cases for law firms, legal clinics, etc., yet these are not the solution but only partial relief for “Lucky Poors”. Still, if you are poor, defending your right will be quite tough work for you which is not an okay situation.

So then, we need to reduce the costs of legal aid and the whole legal process.

But how? Can we use automation on the legal system, just like we do in factories?

Many can say no we cannot. Because the law is about people and automation cannot assess people’s behaviours and moral rules well since it cannot feel it. The argument can continue further like: “For sure we know that there are rules and automation can learn them just like people. However, the law is not just a bunch of rules and codes, it has social rules, moral rules, common courtesies, etc. In other words, the feelings and spirit of being a human have pierced through the heart of the legal system. Therefore, something that is not human or that does not feel like a human can and should not practice law.”

To oppose that in an instant, some people can present examples of the robots that can feel sadness and pain, mostly developed by Boston Dynamics, and ask to imagine what the future technologies will be capable of.

However, we want to talk about a little history here. Let’s imagine we are living in prehistoric ages. We see a forest on fire on a cold winter day. With our infinite curiosity, we get close to it and feel the warmth of the fire. Then we come closer and feel it burns our skin and quickly move away. After living this experience, some of us say that we will invent fire in the caves. The rest of us only laughs since they believe it is impossible. Yet, they invented it! Fast forward a few ages, and you may see that invention of the wheel has gone through the same process.

It is possible to say that inventing something and work systems are different things. So, let’s adapt our historic examples to “working”. People who laughed at the fire and the wheel inventors have possibly laughed at people who tries to establish a settlement, found the settled lifestyle. Fast forward a few ages, nobody can imagine that we will throw the swords and horses away and replace them with motor vehicles and firearms. Even when they see the first rifles in the world, they still did not feel like firearms will replace the sword. To have a more recent example, many people in the early 40s were not thinking racial equality will be a thing, only a few years before the civil movement.

Technological developments increased efficiency in every field of life. Even the tools and gadgets we use are more efficient than a mere decade ago. However, it is not only tools and gadgets became more efficient, but almost every work people also do is now more efficient. It means that we are now producing more value with the same amount of work or producing the same value with less work. Despite its traditionalist, deep-rooted, slow structure, even legal works implemented efficient methods such as electronic documents, e-signatures, online petitions, legal remedies, etc.

Even now tools like kirasystems.com, smith.ai provide AI services for law firms. However, for sure AI will be much more integrated into our lives in the future. Indeed, donotpay.com and robotlawyerlisa.com are offering AI lawyer services to prepare NDAs, object to parking tickets, etc. Yes, they are not capable of doing everything a human lawyer can, but it is the thing with AIs that they are improving themselves while working. If they are objecting to parking tickets now, they will improve themselves to be able to file a lawsuit, or they are writing NDAs now to improve themselves to be capable of writing the entire contract. We believe that AIs will replace lawyers in the future like they will replace many other jobs.

The fact that legal practices are integrated with AIs, the question appears to the mind, to what extent? For some like Clio blog post can say that humans should review data at the end, AIs are only to find and organize it (we believe that they recommend it because of today’s AIs’ capabilities), there may be a much better future for AIs. It is foreseeable that AIs may be as good as, if not better, human lawyers because of their promptness and capacities. For sure human brain can contain a gigantic amount of data it is not good at organizing them while AIs can do both. For instance, *this Forbes article *acknowledges that (even though they too think human lawyers are still needed), AIs are much better at depositions and cross-examinations since their brains are linked to the database and they can check options and their consequences, review them, and apply it to achieve the best possible outcome. However, we humans do have not any links to databases, and we must memorize and remember every portion of data to review our options in the best way. For that said, it is much more time-consuming, inefficient, and probably likely impossible for a human lawyer to compete with an AI one.

https://www.forbes.com/sites/cognitiveworld/2019/02/09/will-a-i-put-lawyers-out-of-business/?sh=1c27aa8231f0

Contrary to what Forbes writer thinks, AIs are replacing humans in legal matters, even today. For instance, researchers at the University of British Columbia (UBC) developed an AI that predicts illegal drugs substances, and structures before they are even invented. As explained in the *article by Malavika Pradeep *AI has created 8.9 million potential drug structures and when the scientists tested 196 new drugs, they saw that AI has already predicted 90% of these drugs despite it did not know they even existed.

https://screenshot-media.com/technology/ai/designer-drug-ai-prediction/

Another example can be given from China. The Chinese government has started to use AI in prosecution lately in the busiest district prosecution office in China. The AI currently handling simpler cases since it is the beginning stage, but it has charged people with 97% accuracy which may be greater than many human prosecutors. It is also noteworthy to mention that AI does not only charge people but also determines to charge them on which crime and penalty. As pointed out in *news reports *it can be said that “what about the other %3?” Well, there is always a chance for mistakes in prosecution, but the risk can be significantly higher with human prosecutors. Though the question they ask is who will be responsible, which is an awkward question at most. Whether or not the prosecutor is an AI or a human, the power of prosecution is owned by states and prosecutors are only their representatives. Therefore, at any mistake, states will be responsible like they are with human prosecutors. Yes, in certain conditions, states can reflect the compensation to the wrongful prosecutor, but we are certain they would rather choose not to pay for prosecutors in exchange for paying occasional compensations.

https://www.dailymail.co.uk/news/article-10346933/China-develops-AI-prosecutor-press-charges-97-accuracy.html

The point is, there have always been people who think the world will not change, yet it does. So, why not the legal system be able to change itself? We automate almost everything we produce in a way. Even the farming industry, maybe the last industry that comes to mind while thinking automation, is slowly being automated by satellite commanded tractors. Yes, the law is a product of the human mind and lifestyle, but practicing the law does or will not require human activity, things also produced by humans can practice.

Yet again, we are talking about the future based on our presumptions relying on what we have today, without knowing their certainty. At most, it can be said that the future is a foggy place for legal automation. However, we need to improve our legal system to increase equality in justice ASAP. Because every second we do not improve the law and justice, someone somewhere around the world accepts what happened and gives in their rights. But what can we do today to help develop our legal system?

Usually, lawyers keep the results and information they acquired during their research confidential, like a trade secret. Actually, it is a trade secret because being an attorney is a job of selling legal knowledge which is gained through time-consuming research. Yes, although they are usually seen working in courtrooms what takes most of the time in a legal process is always the research part. Then we need to reduce the time needed by doing less research but also learning the same knowledge. Since AI is an option in the future (it actually isn’t but let’s assume it is), the only way to do that is what humanity does since the dawn of civilization, sharing. Like Gabriel Shapiro shared in his article, not sharing legal knowledge causes doing the same research every time on similar issues, which is absurd. Let’s say a person hired a lawyer in a complicated lease problem. The lawyer reads hundreds of precedents and laws to find the solution, brings it up at the court or settlement meeting, and did his job. Then, another person hires another lawyer on a similar issue. To do his job duly, the second lawyer reads hundreds of precedents and laws too. Only if the first lawyer shared the knowledge he/she found, the second person would not pay any fee for the time spent on research.

https://lexnode.substack.com/p/autonomous-lawyering?utm_source=url&s=r

You can imagine the snowball effect here. The information lawyers deducted from will be publicly available and all the lawyers will charge their clients less fee because the time they work is decreased. They can serve more clients the time they gain by reducing research time.

Increased efficiency will also help the other legal actors, judges, and prosecutors. They also will reach public information which will help them during their work. For instance, a prosecutor will be faster while preparing an indictment, making a decision will be easier and faster for judges. In the end, our legal system will be improved in its every end.

That is a way to help to make justice available for everyone.

Another way of helping has been described by Shapiro as “Autonomous Lawyers”. Actually, we can call it sub-concept because it foresees lawyers to work just like the way we explained above, by sharing information. The difference is in pricing.

For sure, sharing information will greatly drop the costs down but the autonomous lawyer system is capable of eliminating the attorney fee completely in applicable cases. Today, we can see this system is used mostly in crypto lawyers. Basically, the system expects you to become a volunteer lawyer and earn your fee through contributing to the community itself. For instance, you have an investment in a crypto project, and you help it on legal matters, the value of that project’s product (“token”) increases. In the end, your tokens’ values increase and you earn your fee through contributing to the platform. Or you may not have any tokens, but the platform may grant/send you some tokens for your contribution. In the end, you have been compensated by earning tokens or increasing your tokens’ value, the knowledge you created becomes publicly available and the platform’s need is met. Thus, society improves. It is a win for everyone.

Indeed, making information publicly available and furthermore, autonomous lawyers, with the opportunities of web3 contributes to humanity’s knowledge and development. But also, having all the information publicly available will help and improve the development process of AIs in the legal field too. Because the most valuable resource while developing AI is information about the work it will do. Since all information will become public with these methods, anyone with skills will have the opportunity to develop AI for law-related works, in contrast to keeping private since accessing a lot of private information will need a huge capital.

In summary, we are far from developing Artificial General Intelligences (“AGIs”), which are basically living machines, but specialized AIs are easier to develop, and they are already in our lives. So, it is not hard to think about lawyer AIs, judge AIs, prosecutor AIs, etc. One of the things we can do to contribute to achieving that future goes by becoming an autonomous lawyer. With that help, developers will have more information to train their AIs. How to become one? It is explained in Shapiro's article here. Let’s become autonomous, let’s build the future.

We tried to briefly (!) explain this short but effective six-articles regulation, provided that it is longer than the regulation.

Purpose and scope of the regulation

According to the first article, the purpose of the regulation is;

• The non-use of crypto assets in "payments”,

• Not to be used crypto assets directly or indirectly in the provision of payment services and the issuance of electronic funds,

• Not entering of payment institutions and electronic funds institutions into a wire process with the platforms that provide buying, selling, custody, transfer, or issue services regarding Crypto assets.

Crypto assets received legal recognition for the first time in Turkey with this regulation. Accordingly, a crypto-asset is accepted as assets that;

• use distributed ledger technology or similar technology

• is virtually created and distributed over digital networks,

• is not qualified as nominal money, bank money, electronic money, payment instrument, movable property, or any other capital market instrument,

• is considered intangible assets.

Some definitions will be needed to explain the amendment made with the regulation.

• A payment system is a structure that has common rules and provides the necessary infrastructure for transactions to be carried out to ensure the realization of transfers of funds or movable assets arising from money transfer orders between three or more participants. For example, the digital banking system established to enable Ahmet to transfer money to Ayşe through X Bank is a payment system.

• A payment account is an account opened on behalf of the sender or recipient and it is used in the execution of the payment process (deposit, transfer, and withdrawal of funds performed on the instruction). For example, Ahmet's deposit account in Bank X is a payment account.

• Payment service is regulated by Law No. 6493. Accordingly, the following are considered as payment services:

  • Deposit to a payment account, withdrawal from a payment account, and other operating activities that enable these services,

  • Debit transactions involving the transfer of funds in the payment account provided by the sender and recipients' payment service provider, payment transactions with a payment card or similar means, regular payment orders and money transfers,

  • Issuance and receiving of the payment instrument (tools like card, mobile phone, password, etc. that is determined between the payment service provider and the customer and required to perform the transaction),

  • Money transfer,

  • A payment transaction (in short, non-cash payments) in which the sender's approval for the payment transaction is given via information or electronic communication device and the payment is made to the information or electronic communication operator that acts only as an intermediary between the user and the supplier of goods or services,

• Payment organizations; refer to legal entities authorized by law 6493 to provide payment services. Click here for payment organizations that are currently in business.

• Electronic money organizations refer to legal entities authorized to issue electronic money in accordance with law 6493. Click here for electronic money organizations that are currently in business.

• Electronic money refers to the monetary value that is issued in return for funds accepted by the electronic money institution, stored electronically, used to perform payment transactions, and accepted as a means of payment by real and legal persons other than the electronic money institution.

What the Regulation Provides

According to the regulation, crypto-assets cannot be used directly or indirectly in payment transactions, and services for their use cannot be offered.

A payment process refers to deposit, transfer, and withdrawal activities performed on the instruction. So that, crypto assets will not be able to be used in payment transactions that will be made by the payment institution and/or electronic money institutions.

This arrangement will only cover transactions with “payment systems”. In other words, there is no obstacle to the use of the crypto asset in exchange transactions that you will make without a bank or any brokerage firm. In other words, in exchange for goods or services, the buyer will be able to pay with cryptocurrency if the seller accepts.

In contrast, cryptocurrency cannot be used when making deposits, transfers, and withdrawals through banks, payment institutions, and electronic money institutions. For example, cryptocurrencies cannot be purchased from the ATM and be sent via EFT. It will be possible to transfer money to the cryptocurrency exchange platforms or withdraw money from them only through the bank. Because the regulation prohibits payment organizations and electronic money organizations from mediating activities related to crypto-assets.

As of 30.04.2021, when the regulation came into force, it will not be possible to deposit, withdraw or transfer crypto assets through electronic money institutions such as Papara and Ininal.

In the fourth article of the regulation, two more restrictions were introduced.

• Banks, payment institutions, and electronic money institutions will not be able to perform activities in which crypto assets will be used directly or indirectly in the provision of the above-mentioned payment services and issuing electronic money. In simple terms; banks, payment institutions, or electronic money institutions;

  • will not be able to give BTC, ETH, etc. in exchange for TL or USD

  • will not be able to transfer, withdraw, invest, transfer funds, and make payments using the banking system.

• Payment institutions and electronic money institutions cannot mediate the purchase, sale, storage, transfer, or issuance of crypto assets to platforms or the transfer of funds from these platforms. Accordingly, cryptocurrency exchange platforms will only be able to transfer money through banks..

In summary

Although it contradicts the legal method, this Regulation seeks to remove payment institutions and electronic money institutions that offer commission-free or low-commission money transfers to crypto money exchanges from the system. All cryptocurrency transactions, including trading and transferring, are not prohibited.

I presume that the state is attempting to prevent crypto assets, which are created using cryptographic techniques and hence susceptible to decentralized transactions and are therefore untraceable, from being used in offenses such as money laundering. 

For this reason, again, I presume that while the state cannot monitor the existence and transfer of cryptocurrencies, it has sought to conduct these transactions exclusively through banks to monitor the activities associated with the purchase and sale of cryptocurrencies in exchange for fiat money, bank money, or electronic money in the Republic of Turkey.

It seemed obvious that crypto assets were not legally accepted as “money.” The Regulation confirmed this. The Regulation recognized that crypto assets are intangible assets that cannot be classified as any capital market instrument. Despite this Law, the legal status of cryptocurrencies, or contracts for purchasing and selling cryptocurrencies in return for fiat, bank, or electronic money, remains unknown. 

Because this is not a case involving a legally recognized contract or asset, in this situation, it is fair to recognize that cryptocurrencies are a unique asset and that contracts for purchasing and selling are in nature somewhere between a sales and a barter contract. However, it would not be correct to make a clear definition at this point.

Additionally, it is believed that the Regulation paves the way for future laws on cryptocurrency taxes. In various countries of the world, cryptocurrencies are taxed as intangible assets or commodities. Due to the fact that it is widely acknowledged that crypto assets are not a capital market instrument under current rules, direct taxation of crypto assets is not conceivable at the moment. However, because the conversion of cryptocurrencies to fiat money can be done through banks in any event, the earnings achieved in this manner can be subject to income tax (maybe in the future, and perhaps, this is just a guess or a prophecy). In other words, the profits must be reported on the individual’s yearly income tax return. Otherwise, a fine might be applied on the basis that the fiat money deposited in the bank account during tax audits is not taxed (indeed, it is a prophecy!).

However, there is currently no regulation that directly addresses the taxation of crypto assets.

Question 1: How can it be determined whether or not the wallet addresses to be utilized by businesses belong to payment or electronic money institutions? 

In fact, it will not be proven, nor will it be necessary. Specifically, there is no impediment to trading between cryptocurrency exchanges or platforms within the scope of the Regulation, as specified in the Regulation. 

In other words, I can transfer 100-XRP from Binance to Gate; this is legal. Issues that the Regulation restricts/obstructs are as follows;

• Crypto assets cannot be used for payments.

• Cryptocurrency assets are not permitted to be utilized directly or indirectly in payment services or the issuance of electronic money.

• Funds cannot be transferred between Payment Institutions, Electronic Money Institutions, and cryptocurrency platforms/exchanges.

In such a scenario, the restricted concerns apply to cases when a relationship between crypto-assets and fiat money is formed. Let’s start with a simple example to examine the question. I have 100-BNB. Currently, its approximate value is around 62,300-USD. The bank is the only place where I can exchange my 100 BNB for 62,300 USD. In other words, I won’t be able to convert these crypto assets into fiat currency unless I have access to a bank. At this point,  we have a cryptocurrency exchange on one side and a bank on the other. 

Payment Institutions and Electronic Money Institutions are monitored and regulated by the Central Bank of the Republic of Turkey. If you transfer money and funds to your account at these institutions by swapping fiat currency for crypto assets, you will be breaching the Regulation. For instance, Binance, one of the most prominent cryptocurrency exchanges now, has suspended withdrawals and deposits via Ininal and Papara as of 30.04.2021. (the date the Regulation came into effect). Thus, the only way to convert crypto assets into fiduciary money on Binance is through the bank now. 

Whereas including money/fund transfer transactions with the crypto platform in these institutions’ account activities, which the CBRT and other financial institutions monitor, will violate the Regulation. As a result, it is believed that there will be no need to obtain the transaction parties’ information via anonymous wallet addresses.

Question 2: While the legislation does not prohibit the use of cryptocurrencies for direct payments, would be omitting the “Law on the Protection of the Consumer” create a conflict between two different legislations? 

As previously stated, the Regulation prohibited the use of crypto assets in payments, payment services offering, and the issue of electronic money. One might argue that there is an inconsistency with the applicable legislation. 

There is no definition of the concept of “payment” in the legislation. Rather than that, some concepts relating to “payment” were specified in Law No. 6493. By examining this, we may get a sense of the “payments” that the Regulation prohibits. 

The activity of depositing, transferring, or withdrawing money on the sender’s or receiver’s order is characterized in the Law as a “payment transaction.” 

Additionally, the term “payment service” is used to refer to transactions (withdrawal, automated payment, debiting, receiving a code by phone, money order, or other non-cash payments, etc.) as covered by Article 12.

We do not know whether the term “payment” in the Regulation means “payment transaction” or “payment service.” However, let us be cautious and take into account that the Regulation prohibits both. Even in this scenario, one cannot conclude that the use of cryptocurrencies is prohibited for purchases made without the involvement of a bank, payment institution, or electronic money institution.

Additionally, it should be remembered that freedom of contract is a constitutional right, and according to Article 13 of the Constitution, constitutional rights should be regulated by legislation. For instance, the requirement that the contract is “within the limitations specified by law” in article 26 of the Turkish Code of Obligations is a typical restriction on this freedom. In such a scenario, prohibiting crypto assets’ direct or indirect use for payment purposes or the supply of services for this aim will be considered unlawful. 

Indeed, the payment transaction and the activities subject to the payment service are the transactions carried out through payment accounts. In this case, if a grocery store accepts, I can buy 1 kg of apples for 1-XRP today. This transaction will not be against the Law. 

The usage of crypto assets for direct exchange transactions was not and cannot be prohibited, as we noted in the annotation. Because purchasing an asset in return for an asset that is not accepted as money or capital, instruments constitutes a barter arrangement and does not create a legal stumbling block. Here instead of crypto-asset, we can exchange it with chickpeas, precious metals or even kisses. 

On the other hand, they are not required to be regulated in the Law on the Protection of the Consumer. Because Law on the Protection of the Consumer evaluates two things while determining its scope:

• Can one of the parties be considered as a consumer?

• Is the relationship between the parties a consumer relationship?

If the answer to both of these questions is yes, the Law attempts to reveal findings that safeguard consumers’ interests. So, when we perform an exchange transaction in return for crypto money, does this operation loses its title as a consumer transaction or create a legal contradiction?

• Consumer means a natural or legal person acting for commercial or non-professional purposes.

• On the other hand, consumer transaction refers to all kinds of contracts and legal transactions (...) established between individuals (...) and consumers in the goods or service markets.

• On the other hand, goods refer to movable properties for shopping, immovable properties for home or holiday reasons, and software, music, video, and similar intangible goods prepared for usage in an electronic environment.

In that situation, there is no harm in admitting that cryptocurrency assets represent an element of “commodity markets,” as defined by the Regulation. Of course, a transaction in the “Apple-XRP” pairing can be a consumer transaction.

Therefore, there will be no conflict between the special Regulation and the general Law on the Protection of the Consumer. Yet, let me add that it is admirable that the “Law on Consumer Protection,” which took effect in 2013, includes such a forward-thinking term.

Question 3: Are global payment intermediary institutions (Crypto Payment Processors/Gateways) that are not licensed in Turkey also considered "payment institutions or electronic money institutions"? If not, what might we anticipate as a result of trade activities conducted via these worldwide institutions?

Currently, Law No. 6493 regulates electronic money institutions and payment organizations. 

Payment service operations may also be carried out through payment institutions, according to the Law. Payment institutions operate through banks. 

The issue of electronic money is restricted to banks, PTTs, and electronic money institutions. Electronic money institutions carry out their activities through banks.

These organizations must be joint-stock companies established following Turkish Law. The CBRT, on the other hand, defines electronic money institutions and payment institutions based on a list that is updated on a regular basis. Only companies who have received the appropriate authorization are permitted to use this title.

Turkey began and progressed its crypto-asset rules in a somewhat more protective manner than other instances across the world, and this has continued. The method of limiting crypto assets was selected, in particular, in order to avoid money laundering and criminal income. In this regard, it is anticipated that wide-ranging limitations would be implemented first, followed by a progressive liberalization of the market over time. As a result, in the crypto money market, which is growing at the same rate as the rest of the economy, it will be impossible for global payment institutions to get directly involved in the national system within two to three years.

Turkey, on the other hand, holds a significant place in the world's cryptocurrency market. Consequently, it should be highlighted that if the door to electronic money institutions or payment institutions is opened, our country has the potential to develop into a favorable market for international corporations.

Question 4: Since traditional electronic payment options (credit cards) are global and have security standards established within the framework of our laws, which institution will be responsible for determining the security standards of cryptocurrency payment infrastructures that companies will provide directly to customers in our country's judicial system to sell their own goods and services? (ICTA?)

Unfortunately, it is not feasible to respond to this issue with the following statement: "If cryptocurrency becomes widely used one day, X will regulate, define, and oversee the security requirements in the payment infrastructures that are associated with it." As a result, it is impossible to predict which institution and which ministry will be responsible for this issue, especially given the nature of cryptocurrencies (such as the Ministry of Finance if it is accepted as money, or the Ministry of Commerce if it is accepted as a commodity or a security, respectively).

When we look at global examples, we see that the German Ministry of Finance accepts Bitcoin as a financial instrument and accounting unit; the Marshall Islands recognizes a cryptocurrency called Sovereign (SOV) developed on the Algogrand infrastructure as the official currency, and several other countries have tax regulations. 

In our country, it is still uncertain who will have the last word. On April 28, 2021, Deputy Minister of Transport and Infrastructure, to which ICTA is adhered to, Omer Fatih Sayan, stated that the financial dimension of the issue is the most important element in the regulation of cryptocurrency and that they have taken "cyber security measures in their respective fields." This may conclude that the ICTA may have the authority to regulate a potential cryptocurrency payment security system.

On the other hand, it can be speculated that the BRSA, which has responsibilities such as establishing the security measures applicable to electronic payment methods, defining the actions to be taken, and inspecting financial institutions in accordance with its own legislation, may also be authorized in this regard. Due to the fact that the activities of banks and private financial institutions are included in the scope of the BRSA's responsibility and that it was established autonomously under Law No. 5411, it is believed that the BRSA is more closely associated with cryptocurrency payment security than other types of financial institutions.

A complete administrative organization will be required, in our opinion, if blockchain technology becomes widely adopted and crypto-assets begin to be utilized in commercial and legal transactions, as well as administrative activities. Consequently, necessary arrangements can be made in various matters, depending on the nature of the payment and the parties involved, the subject of supervision, or other concerns, by ensuring coordination with the central bank, ministries, supreme board, and presidential administrations among other things.

Question 5: As part of the current financial system, companies require that if foreign currency collections are converted into Turkish Lira, a "supplementary invoice" be issued if there is a value difference in the CBRT's exchange rate information between when collections were made and when the currency exchange was completed. Given that businesses can directly take cryptocurrencies in payment for their products and services, but the CBRT has not published any exchange rate data on the issue, so what might we expect in terms of value differences that may develop in the present financial system?

To begin, it should be highlighted that crypto-assets do not fall within the definition of money, foreign currency, capital instrument, security, commodity, or product under existing regulation. Therefore, this question can be answered relatively hypothetically.

Currency difference invoice (supplementary invoice) is issued within the scope of VAT Law No. 3065. It is retained to cover the additional revenue earned by one of the parties as a result of the increase in the exchange rate within accounts denoted in the Turkish Lira. According to Article 73 of the Constitution, tax liabilities are imposed, changed, or removed by Law. To put it another way, it is not feasible to invoice/tax an asset unless the legislation specifically states that the asset will be included in the tax base.

There is no law specifically relating to cryptocurrencies or the group of cryptocurrencies under existing tax legislation. In other words, it is not possible to answer the question clearly in practice in the current system.

While there are now no barriers to purchasing crypto assets, it is most definitely not possible to generate a supplementary invoice in this situation. In that regard, Article 5.3 of the VAT General Implementation Communiqué clarifies that the exchange rate difference shall be taxed only in transactions where the price is represented in foreign currency or is indexed to foreign currency. On the other hand, cryptocurrency is not a foreign currency, nor is it a foreign currency-indexed transaction. It is exchanged on independent exchanges and circulates in a decentralized, distributed ecosystem apart from fiat currency. 

If we still want the person who buys cryptocurrency and gives something in return to pay tax, we need to make an assessment depending on which class we put the crypto asset in. (However, it is not possible to achieve these results in the current system). 

In the case of cryptocurrency being treated as real money, shopping with TL fulfills the same function as it now does, and there is no additional tax liability for individuals who purchase cryptocurrencies. Aside from that, typical implications such as issuing invoices, collecting VAT, and subjecting income to taxation will manifest themselves.

If we say that cryptocurrencies are security, value increment tax can apply. If crypto assets are deemed securities, this tax is imposed on the difference between the cost at which the owner buys the crypto asset and the price at which it sells the crypto asset. Click here to calculate the value increment tax due to trading crypto assets if they are considered securities.

If it is acknowledged as a commodity, it will be necessary to make a dual distinction between it and other things. Because it is widely accepted that when goods are exchanged, a barter contract has been concluded. Individuals who make continuous sales throughout the year will have their income classified as commercial income and will be liable to VAT in accordance with applicable legislation. However, if constant transactions are not feasible, VAT will not apply since the revenue will be incidental, and a portion of the income (43,000-TL in 2021) will be excluded.

However, it is anticipated that cryptocurrency assets will be regulated separately in the future financial system. In reality, if we try to find the placement of cryptocurrency under these parameters, which were established long before the advent of crypto assets, we will not find the correct results. Due to the nature of crypto assets, they differ in several ways from traditional financial assets such as money and securities and commodities and other assets. Even though it can be considered a type of capital market instrument in our opinion, the Capital Markets Board asserts that crypto-assets cannot be deemed as capital market instruments or securities due to their intangible traits – i.e., the fact that they do not have any physical assets. 

Question 6: If a publicly traded company includes cryptocurrency in its equity and publishes this information, would this violate current laws or regulations? Is it possible that there is a factor that might negatively impact the CMB(Capital Markets Board) in this situation?

The issuers or related parties must communicate to the public any information, events, or developments that may impact the value and price of capital market instruments or the investment choices of investors in line with Article 15 of the Capital Market Law. Additionally, the incorporation of cryptocurrencies in a company's stock might be viewed as a subject that should be notified to the public via publication on the KAP (Public Disclosure Platform). 

The Law makes no provision for the exclusion of cryptocurrency from public disclosure notices yet. Thus, even a brief scan of KAP reveals that, as of 18.11.2020, some information regarding cryptocurrency supply, crypto currency investments, and crypto currency exchanges has been made publicly available as Material Disclosures.

The Communiqué on Principles Concerning Public Disclosure of Material Events' article 20 and its sections regulate material event disclosures. This requires that the notification be provided to the appropriate stock exchange by 9:00 a.m. on the third business day after the day on which it occurs. 

Ultimately, it is considered that this is not a violation of the Law, but rather a necessity. This criteria is met by a number of businesses, and there are no issues that might negatively trigger the CMB.

It’s oLegal here, a small group of tech enthusiast lawyers, eager to improve themselves, settling in Turkey now. We’d like to introduce ourselves first and talk about our wishes and projects.

Before here, we were trying to contribute to the community as much as we can through tools like LinkedIn, Notion, etc.

https://twitter.com/OlgunLegal/status/1467446011429892102?s=20

https://www.linkedin.com/feed/update/urn:li:ugcPost:6833397991009722368/?updateEntityUrn=urn%3Ali%3Afs_updateV2%3A%28urn%3Ali%3AugcPost%3A6833397991009722368%2CFEED_DETAIL%2CEMPTY%2CDEFAULT%2Cfalse%29

We and our trust in the power of the Internet created the opportunity for us to meet a platform like Mirror. It really is a great chance for us. Mirror may provide the opportunity to reach more crypto-enthusiasts and contribute to the community. After all, it is the most important matter at the hand, “to contribute to grow”. But also, we love to work with blockchain and Web 3.0.

In the future, we have our projects on integrating legal institutions with decentralized community and organizations. There are a few things left to realize some of our projects. Also, we should admit that opportunities provided here, Mirror, have speeded up our work.

Briefly, we’d like to create content, especially about the field of the intersection of law and blockchain, to contribute to the “crypto-community” to try to help improve it as much as we can.

We wish to be heard, so we work hard to earn it!

May we meet again,

oLegal