Turkish Law Blog

Blockchain Law

Mehmet Burak Küçükislamoğlu Mehmet Burak Küçükislamoğlu/ Nesil Law Group
19 June, 2019
443

Abstract

What is Blockchain is a distributed database in which blockchain information is recorded in blocks, in combination with encryption algorithms? Blockchain is a technology that can be traced, but not broken, built with a chained model. Blockchain technology, which has entered our lives with bitcoin, enables us to operate without a center. Transactions are provided directly between the buyer and the seller with this technology. In this sense, it would not be wrong to say that Blockchain ensures that transactions are done in privacy and security.

What is Blockchain Technology?

  • The first feature of Blockchain technology is that it introduced distributed architecture as an alternative to centralized architecture for data logging system. In central architecture, the coordination of all the computers in the system is done from a center and the data exchange is realized through this center. In a distributed architecture, all computers are in an equal position, all of them contribute to the system and use the system.
  • Blockchain, despite the distributed structure, allows the data to be protected by not allowing the data to be changed by others. Because if a person wants to keep a data network over the data to be copied and replicated to large networks and will be stored in different databases will need to ensure the security of this data. Otherwise, Blockchain will not have much of a function at storing data.
  • The last feature of Blockchain Technology is the fact that the data is in a chain on top of each other. The data is transferred to a user by summarizing and encrypting the data, then the user process is overwritten by the user and sent to other users on the network. In this way, the process of continuous validation and encryption as a chain, follow each other, it is impossible to change the data.

Personal Data Protection and Bitcoin

  • Personal data refers to any data relating to a specific or identifiable natural person. The law on the protection of personal data created by many different national and international regulations shows the necessity of Bitcoin and other crypto coins. Blockchain technology, which has entered our lives with Bitcoin, makes it difficult to destroy information and data hidden in virtual data rings. In previous years, however, ABAD recognized the right to be forgotten in a decision it had made and it allowed the data to be deleted when necessary. The contribution of international ijtihad, conventions or agreements to the protection of personal data law in our country is undeniable. The decision of the ABAD is also related to the KVKK. In other words, according to KVKK, persons have the right to request the deletion or deletion of their information. But the law of blockchain poses a distrust in the sense of the protection of personal data.
  • With Blockchain technology, it is tried to provide accuracy and security in records. In order to ensure the security of the transactions made with Bitcoin in the virtual environment, there was a need for registration. Blockchain technology eliminates the possibility of deleting the records entered into the blocks and recording of the transactions. When this data needs to be corrected or when it is requested to be deleted, it is an enigma about how to perform the operation under KVKK and how to eliminate it. However, it is clear that it will not be easy to intervene in the data recorded using blockchain technology. Considering these problems, the relationship between Bitcoin and law arises. The law must be developed and developed in accordance with the developing technology and new life order. Therefore, the updating of the Law on the Protection of Personal Data (KVKK) and personal data in accordance with Blockchain technology is of great importance in terms of data holders and those who process them.

Bitcoin in terms of Criminal Law

  • Bitcoin has not been regulated in terms of criminal law and is not mentioned in the Turkish Penal Code and the relevant legislation. Article 6 of the Turkish Penal Code also stipulates that no penalty can be imposed and no security measures can be imposed on an act which is not explicitly criminal. In other words, activities such as Bitcoin trading will not be considered in the context of criminal law. But even if the virtual money is stolen from your wallets, there are many problems such as the shattered disappearance of some exchanges, the security gaps that are not subject to inspection. In order to solve these problems, to establish the reliability and to eliminate the suspicions, it is necessary to make legal arrangements.
  • Article 282 of the Turkish Criminal Code also regulates the subject matter. There is a sanction on laundering property value arising from the crime, and there is no obstacle in front of this provision for electronic money transfers to be considered as a crime. According to the article;
    • The person who subjugates the assets of a property that has been imposed for six months or more of his / her prison sentence to a foreign country for the purpose of concealing the illegitimate source of the offense or concealing the illegitimate source or obtaining a legitimate means of imprisonment for three years to seven years and twenty until the fine is fined.
    • Without participating in the processing of the offense in the first paragraph, the person who acquires, accepts, holds or uses the value of the property constituting the subject of this offense, shall be sentenced to imprisonment from two years up to five years.
    • If this offense is committed by a public official or by a person of a certain profession during the execution of this profession, the prison sentence shall be increased by half.
    • If this offense is committed within the framework of the activity of an organization which is established for committing a crime, the penalty shall be increased one fold.
    • Due to the processing of this crime, legal measures specific to these persons are determined.

Types of Blockchain

  • The main distinction that determines the Blockchain types is that the Blockchain network is Open (Public) or Closed (Private).
  • Open Network: A network where all users can communicate with another user wherever they are. Today, the most common and best-known example is the Internet.
  • Closed Network: It is called non-public networks whose users are limited by certain features. Examples of closed networks include ATMs and networks between banks.

The Legal Aspect of Bitcoin

  • Bitcoin does not comply with the definition in the 3 rd article of the Law on Payment and Securities Reconciliation Systems, Payment Services and Electronic Money Institutions No. 6493 with respect to the Turkish Law in the European Union with the definition in the Electronic Money Directive 2009/110. it is welcome.
  • Although there is no geographical boundary in virtual currencies, it is difficult to determine which rules will be applied when there are no clear regulations on jurisdiction. Although this situation is one of the reasons why virtual money is preferred, official bank institutions and legislators are not included in the process and therefore they can be used in the processing of economic crimes. It can be used in the processing of economic crimes such as money laundering, fraud, and financing of terrorist groups.

In Our Opinion: In the absence of legal regulations on bitcoin and crypto crosses and for the technological infrastructure appropriate for the exploitation, malicious uses should be blocked and sanctioned. Bitcoin and crypto para trading companies should be regulated by laws and standards should be set and, if necessary, income obtained through these companies should be taxed. Other than the companies subject to the audit, crypto-trading must be sanctioned and legal security of the individuals and the public should be ensured. In this way, the environment of trust will be established and the rights and freedoms will be guaranteed.

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