ABSTRACT
Regardless of the conditions required for Bitcoin to be adopted as capital in kind within the framework of the Turkish Commercial Code numbered 6102 (“TCC”), the fact that the value of Bitcoin is not predictable and that it does not have a specific legal basis poses significant obstacles to this process.
I. INTRODUCTION
The rise of digital financial instruments in recent years, the development of the blockchain system, and the acceleration of digitalization in all areas of society have led cryptocurrencies to play an important role in the economic and commercial world. Cryptocurrencies, which are used as globally accepted digital financial instruments, bring a new dimension to the capital structures of companies. While the introduction of Bitcoin, the pioneer of cryptocurrencies, as capital to commercial companies has the potential to create significant changes in financial strategies, it also raises legal challenges. In our article, first, the characteristics of cryptocurrencies and Bitcoin in particular will be discussed; then, the conditions for the introduction of Bitcoin as capital for commercial companies and Bitcoin’s compliance with these conditions will be evaluated.
II. CRYPTOCURRENCIES
Cryptocurrency is a decentralized, peer to peer (P2P) network-based virtual currency that can be traded online and converted into other currencies1. Cryptocurrency is unregulated as it does not rely on any central authority or institution and is used online2. With cryptocurrencies, individuals or institutions can spend or exchange money in the same way as they do with real money. Cryptocurrency expresses an economic value as a result of its functions using encryption and its digital data. The concept of cryptocurrency includes Bitcoin, Altcoins and Token3. An Altcoin refers to all cryptocurrencies other than Bitcoin that are developed4 using Bitcoin technologies5. Cryptocurrencies that use their own blockchain are called “coin”; those that are traded on another coin’s blockchain are called “tokens”6. Differing from centralized electronic money and banking systems, cryptocurrencies have a decentralized structure. This decentralized structure is controlled by blockchain transaction databases7.
A. Bitcoin
As a digital currency that operates on the basis of blockchain technology, Bitcoin is recognized as the first and most widely used cryptocurrency8. Since its creation in 2009 by an unknown person with the nickname “Satashi Nakamato”, the use of Bitcoin has continued to grow exponentially around the world9. Bitcoin is a peer-to-peer network that is decentralized and not subject to the control of any institution or person. Every transaction related to the purchase and sale of Bitcoins is recorded on a blockchain network called a “block chain”, ensuring the security of all transactions10. Bitcoin transactions are carried out directly between bitcoin addresses11.
In order to acquire Bitcoins, it is necessary to produce Bitcoins by using the computer’s processing power to solve certain algorithms within the scope of the procedure called “mining”, to buy Bitcoins on Bitcoin exchanges in exchange for legal currencies, or to accept this virtual currency in exchange for the sale of goods or services. Bitcoins acquired in this way and stored in a digital environment called a “wallet” can be transferred to other accounts completely anonymously. These transfers can be made without the intermediation and supervision of an authorized financial institution and without being subject to money transfer controls12. Despite being public, all these transactions are considered secure given that they are anonymous. The value of Bitcoin, which can be produced in limited quantities, is determined by the supply and demand of the market, and this value cannot be intervened by any center, authority or institution in any way13. Thus, there are also downsides to Bitcoin, such as exposure to all risks in the market and disequilibrium of the value14.
B. Nature of Cryptocurrencies under Turkish Law
Article 3/1 of the Regulation on the Disuse of Crypto Assets in Payments published in the Official Gazette dated 16.04.2021 and numbered 31456 (“Regulation”) defines crypto asset for the first time in our law. According to this article, “...intangible assets that are created virtually using distributed ledger technology or a similar technology and distributed via digital networks, but are not classed as fiat money, deposit money, electronic money, payment instruments, securities or other capital market instruments...” are defined as crypto assets. Although it is stated that this definition is made only for the implementation of this regulation, the definition sets a precedent for Turkish Law. According to the aforementioned definition, cryptocurrencies are not legally recognized as an official currency or cash15.
III. COMMERCIAL COMPANIES AND THE CAPITAL ELEMENT
While regulating the obligation to contribute capital to commercial companies, the article 127 of the TCC lists the values that may constitute capital in a very broad manner. Nevertheless, the values specified in this provision are not subject to the principle of numerus clausus. As a rule, unless otherwise provided by law, anything that has economic value and can be transferred to others may be brought as capital to commercial companies16. The capital contributed to the company must be suitable for achieving the company’s business goals and ensuring its continuity. Indeed, the purpose of commercial companies is to continuously generate profit, and companies try to maintain their continuity in line with this goal.
In the doctrine, capital is basically divided into three groups as capital in cash, capital in kind, labor and intellectual capital. If the capital is brought in the form of money, it is referred to as cash capital17. The money regulated under Article 127/1-a of the TCC refers to convertible currency used as legal tender. Convertibility refers to the ability to convert currencies into each other. At this point, convertibility between currencies is taken as a basis. Within the scope of the Law, money is defined as a paper or metal object with a value written on it, which is circulated by the government and used as a means of payment within the country18.
Even though the TCC uses the concept of capital in kind in many of its articles, it does not explicitly define this concept. Pursuant to Article 128/2 of the TCC, when it is annotated to the title deed, immovable property, which is included in the company agreement or articles of association with its value determined by an expert, intellectual property rights and other assets are registered in special registries, if any, and movables are entrusted to a trustworthy person is considered as capital in kind. Therefore, all assets other than capital in cash are considered as capital in kind19.
IV. THE ABILITY TO BRING BITCOIN AS CAPITAL TO COMMERCIAL COMPANIES
In order for Bitcoin to be accepted as money (cash capital) pursuant to Article 127/1-a of the TCC, it must have a circulation feature. In contrast, Bitcoin is an intangible asset and cannot be considered cash capital since it is not subject to a central authority, is not widely used and does not contain a fixed value. In addition, it is technically not possible to use Bitcoin as cash capital since the Regulation states that no direct or indirect cash payment or service can be made or provided with cryptocurrency. In addition, the exchange rate volatility in cryptocurrency exchanges prevents cryptocurrencies from being considered in the same status as circulating currencies20.
Since the TCC does not stipulate any special limitation or condition in this respect, the general provision, Art. 127 of the TCC, shall apply to partnerships in the form of unlimited partnerships. In unlimited partnerships, the liability of all shareholders is unlimited and the shareholders are liable to the creditors of the company with all of their assets21. In limited partnership companies that have two types of shareholders, namely the commanditee and the commanding shareholder, the values that may be brought as capital to the limited partnership companies in terms of the commanding shareholder are regulated under Article 307/2 of the TCC22. Pursuant to this article, a commanding partner may not contribute his/her personal labor or commercial reputation as capital to the company. Since Bitcoin cannot be considered as personal labor or commercial reputation, it is not covered by this prohibition. Thus, there is no obstacle to the capitalization of Bitcoin in collective and limited partnership companies.
In joint stock companies and limited liability companies, the elements to be brought to the company as capital are limited compared to partnerships. Pursuant to Article 329/2 of the TCC, the liability of shareholders in joint stock companies is limited only to the amount of the shares they have committed, and this is referred to as the “limited liability principle” in the doctrine23. In addition, Article 332 of the TCC stipulates a minimum capital amount for the establishment of joint stock and limited liability companies, thereby limiting the capital that shareholders of joint stock and limited liability companies may contribute to these companies pursuant to the principle of limited liability and the minimum capital amount rule. Pursuant to Art. 342/1 of the TCC, in joint stock companies, “Assets, including intellectual property rights and virtual media, on which there is no limited real right in rem, attachment and injunction, which can be valued and transferred in cash, may be contributed as capital in kind”. However,“... Acts of service, personal labor, commercial reputation and outstanding receivables cannot be capital”. Article 581 of the TCC, which regulates the capitalization of limited liability companies, also adopts these rules and additionally regulates that names may also be included as capital in kind. Bitcoin does not fall within the scope of this prohibition, as it cannot be considered as an act of service, personal labor, commercial reputation or an outstanding receivable. Pursuant to Articles 342/1 and 581 of the TCC, in order for Bitcoin to be brought as capital, it must constitute an asset value, be valued in cash, and be transferable. Being convertible into cash means that the value in kind brought in must be convertible into a common unit of measurement, i.e. be expressed in money/ cash24. Bitcoin has an official exchange rate that corresponds to a country’s currency and can be converted to its value in an official country’s currency by selling it on a cryptocurrency exchange. Therefore, when Bitcoin is brought as capital in kind, it can be considered as an asset that can be used and benefited by the company.
The fact that the price of Bitcoin fluctuates significantly from year to year depending on supply and demand, and that its exchange rate is unstable may cause problems especially for joint stock and limited liability companies. With the Presidential Decree numbered 7887 published in the Official Gazette dated 25.11.2023, the minimum capital amount for the establishment of joint stock and limited liability companies stipulated in Article 332 of the TCC has been increased and this amount has been determined as TRY 250,000 (two hundred and fifty thousand Turkish Liras) for joint stock companies, TRY 500,000 (five hundred thousand Turkish Liras) for joint stock companies accepting the registered capital system and TRY 50,000 (fifty thousand Turkish Liras) for limited liability companies. In the event that only Bitcoin is brought as capital to a joint stock or limited liability company, there may be a risk that the amount added to the company’s capital may fall below the relevant minimum amounts due to rapid changes in the exchange rate of Bitcoin. Therefore, the introduction of Bitcoin as capital may cause problems in terms of the ability of the capital to meet the company’s operational objectives. Accordingly, the use of Bitcoin, whose value changes rapidly, as capital has the potential to contradict the principle of continuity of commercial companies.
V. CONCLUSION
The issue of introducing Bitcoin as capital to commercial companies continues to be a controversial subject. During the drafting and entry into force of the TCC, the legislator did not foresee any regulation regarding Bitcoin, as Bitcoin did not play an active role in the world economy and had not yet gained popularity at that time. In this regard, it is evident that new legal regulations are needed. While Bitcoin’s decentralized structure and digital nature make its economic viability attractive, factors such as its fluctuating value and legal uncertainties pose serious risks. Since Bitcoin cannot be brought as cash capital, it can only be introduced as capital in kind to commercial companies. However, although it can be argued that the necessary conditions are met for it to be brought as capital in kind, this situation also raises legal problems.
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FOOTNOTE
1 The European Central Bank (ECB), in its October 2012 report on the subject, defined a virtual currency as “a form of digital money, not regulated by law, usually issued and controlled by its developers, accepted and used by members of a particular virtual environment”. (ECB, 2012, p.5) See also Betül Üzer, “Sanal Para Birimleri”, Uzmanlık Yeterlik Tezi, Türkiye Cumhuriyet Merkez Bankası Ödeme Sistemleri Genel Müdürlüğü, Ankara 2017, p. 9.
2 Kadir Cengiz, “En Popüler Kripto Para Birimi: Bitcoin”, Sosyal Bilimler Araştırmaları Dergisi (BANÜSAD), 2018; 1(2), p. 90.
3 Fatih Bilgili/ M. Fatih Cengil, “Bitcoin Özelinde Kripto Paraların Ticaret Şirketlerine Sermaye Olarak Getirilmesi”, Ankara Hacı Bayram Veli Üniversitesi Hukuk Fakültesi Dergisi V. XXIII, Y. 2019, Iss. 3, p. 3.
4 Abdurrahman Çarkacıoğlu, Kripto-Para Bitcoin, Sermaye Piyasası Kurulu Araştırma Dairesi, (Araştırma Raporu), December, 2016, p. 54.
5 Utku Erdinç/ Nurbanu Bursa, “Covıd-19 Pandemi Sürecinde Twitter Yorumları ile Altcoın Kripto Para Piyasası Arasındaki Nedenselliğin Duygu Analizi ile İncelenmesi: Ripple Örneği”, Yönetim ve Ekonomi Araştırmaları Dergisi, V. 19, Iss. 4, 2021, p. 363.
6 Bilgili/ Cengil, p. 4.
7 Çarkacıoğlu, Kripto-Para Bitcoin, Sermaye Piyasası Kurulu Araştırma Dairesi, (Araştırma Raporu), December, 2016, p. 8.
8 Bilgili/ Cengil, p. 3.
9 Burcu Gediz Oral/ Yusuf Yeşilkaya, “Kripto Para İkilemi: Karapara Aklama ve Bitcoin”, Süleyman Demirel Üniversitesi Sosyal Bilimler Enstitüsü Dergisi Year: 2021/1, Iss: 39, p. 21
10 Havva Gültekin/ Adil Oğuzhan, “Sermaye Piyasası ile Sanal Para Bitcoin Arasındaki Nedensellik İlişkisi: Türkiye Örneği”, Finans Ekonomi ve Sosyal Araştırmalar Dergisi, V. 6 Iss. 4, December, 2021, p. 879.
11 Murat Balcı/ Kerim Çakır, Kripto Para ve Elektronik Para Suçları, Adalet Yayınevi, p. 58.
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13 Havva/ Oğuzhan, p. 879.
14 Ö. F. Güleç/ E. Çevik/ N. Bahadır, “Bitcoin ile Finansal Göstergeler Arasındaki İlişkinin İncelenmesi”, Kırklareli Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, 7(2), 2018, p. 20-21.
15 Ömer Batuhan Uçmak, “Dijital Çağda Yansımalar: Kripto Paralar Ticaret Şirketlerine Sermaye Olarak Getirilebilir mi?”, Hukuk ve Bilişim Dergisi (E-Dergi), 2023 (Last Date of Access: 11.08.2024).
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20 Uçmak.
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22 Bilgili/ Cengil, p. 9.
23 Bahtiyar, p. 9.
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