Introduction
The increasing use of crypto-assets as an investment instrument and their significant valuation requires the recognition of these assets by the legal systems. This is because the economic popularity of crypto-assets has led to the need for regulation on how to safely handle transactions on these assets and to protect the interests of those making such transactions. In this context, the questions of what legal framework cryptoassets will be subject to and how the rights holders are to be protected have been raised, and discussions about whether cryptoassets are property or the applicability of the legal frameworks that apply to property have also been raised. appeared.
Definition of crypto assets
Crypto-assets refer to the representation of values in a blockchain[1] environment.[2] Although cryptoassets are not defined in a limited way, according to the Regulation on the Misuse of Cryptoassets in Payments (“Regulation“), “cryptoassets refer to intangible assets … that are created virtually using distributed ledger technology or similar technology and distributed via digital networks” which is the first and only definition of crypto-assets in Turkish legislation. Similarly, the EU directive “Markets in Crypto-assets, and Amending Directive (EU) 2019/1937”, which regulates crypto-assets, defines crypto-assets. as “digital assets created virtually using distributed ledger technology or similar technology and distributed and transmitted through digital networks“.[3] In parallel, MICA defines cryptoassets as “corresponding rights or assets that can be distributed and stored electronically using distributed ledger technology or similar technology“Although these definitions appear to be interrelated, there is no clear consensus on the definition of cryptoassets in the literature, and each country defines cryptoassets according to its own legal provisions.
Crypto-assets can be categorized into two types: “cryptocurrencies/coins” and “tokens” due to their nature.[4] Cryptocurrencies are virtual assets that have their own blockchain network, have economic value and can be used as a medium of exchange within their network.[5] They are created using cryptographic methods and are divided into Bitcoin and Altcoins (alternative coins). In addition, stablecoins, which are created to prevent the value fluctuations of cryptocurrencies and are indexed to a specific asset, are also included under the title of cryptocurrencies.
Tokens, on the other hand, can be defined as cryptoassets that do not have their own blockchain network and can be used for payment purposes issued within the framework of a blockchain project.[6] They can be used not only as a means of payment, but also for other purposes, for example for the use of a right, the offer of a product or a service, or for a share in the income stream of the project in question. Furthermore, tokens may be based on a specific asset (e.g. “BiLira“, “BiGa“, etc.), as well as assets such as NFTs (non-fungible tokens or “qualified intellectual property“), which stand out with their uniqueness, are also considered tokens.
The definition of property under Turkish law
The term “property” is not explicitly defined under Turkish law. Considering that the concept of property is dynamic and can vary according to time and need, the doctrine only seeks that it has certain qualities. A common understanding in the doctrine is that those things which are tangible, “corporeal”, “can be owned”, “impersonal” and “have economic value” are to be considered properties. If we examine these aspects for a moment, for something to qualify as property in terms of the corporeality aspect, it must occupy a concrete place in the universe and have a three-dimensional material existence.[7] For this reason, natural forces or independent and perpetual rights cannot be classified as property. However, according to Articles 704, 762 and 998 of the Turkish Civil Code (“TCC“), the legislature has recognized these concepts as subject to the property-like regime.
In terms of “possession”, a tangible thing must be capable of both de facto and de jure possession. Things like celestial bodies, mountains and seas that cannot actually be exercised cannot be classified as property. On the other hand, if the law does not allow the establishment of legal possession over a thing capable of actual possession, then legal possession is not possible.[8]
Regarding the “non-personality” aspect, it should be noted that elements that constitute a person’s identity and personality, such as the human body, limbs and artificial attachments[9]is not considered property.[10]
The economic value aspect is a subject of discussion in the doctrine, whether things without economic value can be classified as property in legal terms. Some authors argue that economic value is a prerequisite for something to be considered property, while others argue that meeting a material or immaterial human need is sufficient for it to be legally considered property, regardless of its economic value.[11]
Can crypto assets be classified as property?
Based on the definition under the Regulation, no crypto-asset can be considered a property due to the term “intangible assets” in the regulation and the absence of a law and an exempted regulation on this subject. However, assuming that the regulation does not apply for a moment, we can assess crypto assets in relation to the above aspects of the property. It should be noted that this assessment should be done separately for every crypto asset.
Some intangible assets are subject to the same legal regime as movable property, just as stated in Article 762 of the TCC. With the statement in Article 762 of the TCC that “the subject matter of chattels … are natural forces that are not within the scope of immovable property“, the legislator makes an exception and states that natural forces can also be regulated within the scope of the property. It is known that computer programs are used to access crypto-assets and a lot of energy is used during the formation of crypto-assets (especially cryptocurrencies). It is claimed by some authors that if it is accepted that energy is within the scope of “natural force” and is suitable for use and benefit, crypto-assets will also fall within the scope of Art. 762[12] of the TCC and the rules on property rights can be applied analogously.[13] The prevailing opinion, however, is that the concept of property should be understood narrowly and the corporeality aspect should not be in doubt when it comes to natural forces.[14]
When examined with regard to establishing possession over it, although we emphasize that it should be examined separately for each crypto-asset, as we have stated, when examined within the framework of cryptocurrencies, it can be said that de facto possession has occurred in the form of of cryptocurrencies, taking into account that access to the cryptocurrency can only be granted by the private key holder.[15] In the context of NFTs, possession can be mentioned if there is a similar encryption method or if they are stored in cold wallets.
There is no dispute that crypto assets have no personal value. In addition, it should be accepted that they have economic value since they are used as investment instruments.
Looking at how different legal systems treat the classification of crypto assets as property, there has been a positive development in the UK. In November 2019, the UK Jurisdiction Task Force recognized crypto assets as property in a published decision.[16] Contrary to Anglo-American law, the fact that cryptoassets do not conform to classical definitions and are characterized as data does not mean that cryptoassets are no longer considered property. In another court decision, crypto-assets were subject to a temporary injunction subject to the provisions of property rights. In German law, however, the dominant view is that crypto-assets do not have the status of property due to the narrow interpretation of the corporeal aspect of the property.[17]
In Turkish law, the temporary injunction granted by Istanbul’s Third Civil Court for Intellectual and Industrial Rights is the first temporary injunction granted in the context of cryptoassets. The court issued a preliminary injunction blocking access to the platforms where Cem Karaca’s portrait was used without permission and preventing the sale of Cem Karaca’s NFT on the Opensea platform. The lawsuit was filed on the grounds that the artist’s personal and intellectual rights were violated by using Cem Karaca’s portrait without permission and selling it as NFT on the Opensea platform.[18] The temporary injunction was appealed, but the Court of Appeal rejected the defendant’s appeal on the merits.[19]
Conclusion
In summary, the classification of an asset as property in the legal sense varies based on different legal systems. In Turkish law, property is defined as assets that have material existence, can be owned, have economic value and are independent of personality. Currently, crypto-assets are not considered tangible assets as defined in the regulation. Therefore, they cannot be characterized as property, although there is some dispute about this in the doctrine.
However, it is possible that crypto-assets may be recognized as property in the future, when the concept of “property” is widely evaluated and adapted to technological developments. If crypto-assets are accepted as property, the consequences of this acceptance must be considered separately. In such a scenario, individuals who lose their private key can file a right or prevention of seizure action within the framework of Article 683/2 of the TCC. However, it is still unclear to whom the claim will be directed and how the decision will be carried out given today’s technological limitations.[20]
