1. Definition of Crypto Assets
The most important issue in the taxation of crypto assets is their definition. The legal definition of crypto assets will determine the authorities that will be subject to the rules and procedures of taxation. In addition, the definition made will result in different outcomes in terms of property rights within the legal framework. There is no agreed-upon definition of crypto assets in the international arena. Satoshi Nakamoto defined crypto assets as follows:
"Cryptographic proof-based, decentralized, convertible digital assets that provide transaction security."
2. Classification of Crypto Assets
Crypto assets, by their nature, resemble many structures found in the existing system, but they do not fully conform to any of them. In this context, it is possible to make crypto assets compatible with this system by making a few revisions to the existing structures, but it is foreseeable that applications will need to be constantly updated due to the developing technology or that they will lead to insufficient applications. In this context, it is a more optimized option to make a new classification taking into account the characteristics of crypto assets.
A. Classification of Crypto Assets as Currency:
In Turkish law, the 2nd article of the 32nd decision issued on the basis of the 1567 numbered Turkish Currency Protection Law is defined as follows:
"Turkish currency: Turkish liras that are in circulation in Turkey in accordance with the laws of the Republic of Turkey or foreign currencies that have not been withdrawn from circulation even if the change period has not expired,Cash: All foreign currencies in the form of banknotes,Foreign exchange (exchange): All kinds of accounts, documents and means that provide payment in foreign currency, including cash."
It is necessary to discuss whether crypto assets are currency. It is not possible to evaluate it as Turkish currency. The obvious reason for this is that crypto assets are not in circulation under any law. It will also not be a matter of definition. It does not comply with the definition of cash because it is neither a banknote nor is it in circulation under the jurisdiction of a foreign country. On the other hand, if it is considered that payment can be made with crypto assets, it can be said that it is accepted as foreign exchange within the scope of the provision given above.
In the 3rd paragraph of the c clause of the 3rd article of the Law on Payment and Securities Clearing Systems, Electronic Money Institutions and Electronic Money Institutions No. 6493, the following definition is given for electronic money:
"A monetary value that is stored electronically, used to make payment transactions defined in this Law and accepted as a payment instrument by real and legal persons other than the electronic money issuer, in exchange for the funds accepted by the electronic money issuer."
Again, under this provision, crypto assets will not be accepted as currency because they are not issued by an institution in exchange for a fund.
The value preservation feature of crypto assets stands out more than its other functions. The fact that crypto assets, which have a stable upward trend in the long and medium term, do not show stability in the short term damages the value preservation function. In fact, the speculative and high-risk nature of crypto assets damages the value preservation feature, but it does not completely eliminate this function. However, the mere value preservation feature is not sufficient to evaluate crypto assets as currency.
At this point, it is necessary to mention the argument that the acceptance of crypto assets by some businesses with crypto assets is a function of the currency's medium of exchange. However, the use of crypto assets by a few businesses does not show that it is a medium of exchange. For this, it must be used in shopping at all times.
B. Classification of Crypto Assets as Commodities
In order to make the evaluation mentioned, it is necessary to define the concept of commodity. Commodities are the names of all goods that are traded, such as energy resources, livestock products, minerals, and agricultural products. It should be noted that commodities have value by their existence when it comes to commodities. There are 133 commodity exchanges affiliated with the Union of Chambers and Commodity Exchanges of Turkey. In addition to traditional commodities such as paper, coal, and tomatoes, electronic texts, software products, and digital products with digital assets are also evaluated as commodities with the development of technology.
The view that does not accept it argues that the thing that makes it possible to take ownership of commodities is exchanging for money, while crypto assets are fundamentally designed as a means of payment. The fact that the purpose of crypto assets is to create a cryptographic payment system, even though it has not yet achieved this goal, is not enough to be considered a commodity.
C. Classification of Crypto Assets as Securities
Securities, which are considered as the first title of the 7th Chapter of the 6102 numbered Turkish Commercial Code, are mentioned as consisting of shares that grant partnership rights and usufruct certificates that grant debt rights in the said law. It is not appropriate to classify crypto assets as securities under the said law.
Another provision governing securities is the 3rd article of the Capital Markets Law. The law literally states the following:
"It is a series of documents that provide partnership or debt rights, represent a certain amount, are used as an investment instrument, generate periodic income, are issued in series of the same nature, have the same wording and are determined by the board."
It is obvious that securities must have the characteristics of providing partnership rights, being issued in series of the same nature, generating periodic income, and being determined by the board. It is clear that crypto assets do not have any of these characteristics. It is not possible to classify crypto assets as securities under the SPK.
The 67th temporary article of the 193 numbered Income Tax Law also uses the following definition:
"The expression "securities and other capital market instruments" used in this article, unless a special determination is made, refers to all kinds of securities or other capital market instruments that are issued in Turkey and recorded by the Capital Markets Board and/or are traded on securities and futures and options exchanges established in Turkey, even if they are not recorded or traded on securities and futures exchanges."
The requirement of being issued in Turkey under the given law article does not comply with the structure of crypto assets.
According to those who think that crypto assets should be considered as a type of security, the first argument is that these assets are acquired for investment purposes and that the said assets can be stored in portfolios. In addition, they support their views with the argument that crypto assets represent a right.
The points that distinguish crypto assets from securities are that they are not designed as securities, that there is no central issuer, and that they are decentralized. The Capital Markets Board did not consider the classification of crypto assets as securities possible because these assets do not rely on a real product. The Board has linked the existence of securities to the real asset on which it is based.
In order for crypto assets themselves to be valued as securities, it is necessary to have a contract for the investment made, to be based on a joint venture, to be motivated by the investor's expectation of profit, and to have realized the said profit together with a third party that encourages it. When these issues are considered together with the others, it is not possible to evaluate crypto assets as securities under our legislation.
D. Classification of Crypto Assets as Intangible Assets
In the 10th article of the 1 Series General Communiqué on Hidden Profit Distribution through Transfer Pricing, the following definition of intangible assets is given:
"Intangible assets refer to the use, use right or sale of copyright of any literary, artistic, scientific nature, including films and tapes used in radio and television broadcasts, any kind of patent, trademark, design or model, plan, secret formula or manufacturing method, or the use of knowledge accumulation based on industrial, commercial, scientific experience, or the use of industrial, commercial, scientific equipment."
"In other words, intangible assets include the right to use industrial assets such as patents, trademarks, trade names, designs, or models, as well as the property rights of literary and artistic works, and intellectual rights such as commercial knowledge accumulation (know-how) and trade secrets."
Another regulation governing intangible assets is Article 70, paragraph 5 of the Income Tax Law. This paragraph states the following:
"Rights such as search, operating and concession rights and licenses, patent (Income from the lease of a patent by the inventors or their legal heirs is considered as freelance income.), trademark, brand, trade name, all kinds of technical drawings, designs, models, plans, cinema and television films, sound and image tapes, and the use or use right of information obtained from experience in the fields of industry, trade and science, such as a secret formula or a manufacturing method are considered as real estate income."
The expressions "rights such as the use or use right of information obtained from experience in the fields of industry, trade and science, such as a secret formula or a manufacturing method" are in line with the characteristics of crypto assets. For example, Russia defines crypto assets as digital rights.
Although the definitions of intangible assets are in line with the characteristics of crypto assets, the fact that they are created as a means of payment, their easy transfer, their trading on their own exchanges, the fact that they have a monetary value affected by exchange rate fluctuations, and their divisibility distinguish crypto assets from intangible assets. At this point, I think it is wrong to classify crypto assets as intangible assets.
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