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Blockchain Technology, Cryptoassets And Regulatory Proposals In KKTC

Updated: Oct 8, 2023



KKTC- Turkish Republic of Northern Cyprus

ICO– Initial Coin Offering

NFT- Non-Fungible Token

DLT- Distributed Ledger Technology


1 - Technology is Everywhere

The agricultural revolution was followed by the industrial revolution. The industrial revolution is now followed by the technological revolution. This revolution brings with it an evolution. Not just in species, but everywhere, evolution occurs. Given this, it is certainly not prophetic to say that the evolution of the technological revolution will continue. Technology is evolving at a terrifying pace. The increase in speed is directly proportional to the time we adopt technology and its spread. For example, when we compare the adoption of radio and the time it takes to reach a certain number of adopters with the adoption and spread of television, the internet and social networks, this can be easily recognized.

Again, when we look at the development of technology, we can now perform tasks that require large expenditures of time and energy (calculation, archiving, etc.) with smart cell phones that are slightly larger than our palms or laptops weighing a few hundred grams.

Our lives are being affected by the technological revolution both positively and negatively. Positive implications include making our lives simpler and saving time. The legislator in particular and the legislation in general have a huge obligation to remove (or at least reduce) these adverse impacts. When we consider that the law is currently “chasing from behind” due to the rapid advancement of technology, it is now clear how challenging the mission is.

It is possible to say that this situation we have mentioned about technology in general is also valid for cryptoassets, which are the part of blockchain technology that attracts the most attention among the public (due to its economic return, in other words, its “emotional side”).

2 - Situation in the Turkish Republic of Northern Cyprus (KKTC)

When we look at the legal regulation of technology in the Turkish Republic of Northern Cyprus (KKTC), taking into account the unshakable fact that legal regulation in an area where there is a gap in the legal regulation of technology is first made for crimes and sanctions, it is possible to say that the “law chasing from behind” has contributed to some extent to eliminate the negative aspects of the legal gaps created by technology with the Law No. 32/2020 on Cybercrimes, which entered into force in 2020, but it still does not provide full protection to those who are victimized or potential victims due to the negative effects of technology. The Law identifies actors in the field on certain issues, defines and classifies certain types of crimes and provides protections on certain issues. However, given the wide scope of the technology and the bureaucratic cumbersomeness of the legislature, there is no shortage of incidents that will, so to speak, “lock up” those who will implement the Law.

For example, if an employee of an office engaged in the purchase and sale of cryptoassets transfers the cryptoassets collected in the office’s electronic wallet (I prefer to use this term, which I find more logical than the term “cryptocurrency” due to their controversial nature and the fact that they have not yet been fully defined in any legislation in our country) or some of them to his own electronic wallet without the knowledge and consent of the employer and this situation is discovered by the employer, what kind of a picture will emerge in terms of legislation? Is it possible to apply the articles of Law No. 32/2020 to the issue or will a solution be sought with general laws?

In the absence of such a case that has not yet been reflected in the KKTC Courts, it is beyond doubt that examining the situation in the light of the legislation in force in the KKTC, taking into account the nature of cryptoassets, will be very useful in order to formulate solutions for the future.


1 - What is Blockchain Technology?

Defining the blockchain technology that underpins cryptoassets will, in my opinion, go a long way in determining the nature of cryptoassets. After all, Bitcoin and Ethereum (among others), the cryptoassets with the largest market capitalization and trading volume in the world, are based on this technology.

Blockchain or Distributed Ledger Technology (DLT) is a technology protocol that enables the direct exchange of data between two parties without the need for an intermediary. Parties in the network perform transactions anonymously with encrypted identities. Each transaction is added to an immutable chain of transactions and distributed to all users on the network.2 From a technical point of view, it would be correct to define blockchain as a combination of a distributed database, decentralized consensus mechanism and cryptographic algorithms. Transaction data on the blockchain is stored in a series of cryptographically connected and potentially infinite data blocks. These blocks are formed by voting on the correctness and validity of transactions by participating nodes through decentralized timestamped algorithms.3

2 - Cryptoassets Based on Blockchain Technology

Although I have used the term “cryptoassets” in the title because I find it more appropriate, many people in the field still refer to cryptoassets as cryptocurrencies, which are formed on the basis of blockchain technology and are different from or include some of the characteristics of traditional price money, electronic money or digital money consisting of zeros and ones that appear in bank accounts (since cryptoassets have some characteristics of digital money and electronic money in certain respects). However, I will prefer to use the term cryptoassets throughout the article (as I find it more appropriate) due to the debates that have not yet reached a conclusion as to whether the money has all the characteristics of money in the traditional sense, such as the way it is produced, the control mechanism over it, the body that decides on its supply, etc. (Likewise, this expression is also used in the “Regulation on the Non-Use of Cryptoassets in Payments” published in the Official Gazette of the Republic of Turkey on April 16, 2021).

As mentioned before, the debate on the nature of cryptoassets is ongoing and the lack of a global consensus on this issue, at least in the KKTC context, seriously challenges the competent authorities (including the judiciary) in resolving legal and criminal disputes that may arise in the absence of enacted legislation on this issue.

3 - Opinions on the Nature of Cryptoassets

There is no global consensus on the nature of cryptoassets, and international organizations’ definitions haven’t been able to give nations a comprehensive road map for using them. The Republic of Turkey, which was greatly impacted by our nation’s post-1974 codification efforts, may likewise be said to be in this situation. The Regulation on the Non-Use of Cryptoassets in Payments focuses on what cryptoassets are not and for what purpose they cannot be used, rather than providing a definition of what their nature is. However, it would not be correct to say that there is no effort to create a definition of the nature of cryptoassets in the Republic of Turkey, considering both this legislation and the doctrine. İmamoğlu argues that there is no direct obstacle to the acceptance of cryptocurrencies as foreign currency in the Turkish Legal System, and that the borrowings made with cryptocurrencies can be considered as borrowings with foreign currency and that the relevant articles of the Turkish Code of Obligations can be applied to the borrowings made with cryptocurrencies.4 İmamoğlu also adds that in the Turkish Legal System, foreign currencies can be considered as foreign currency since they are not counted based on the principle of limited number.5 Güven and Şahinöz, in their study on Bitcoin, which has the largest market capitalization and transaction volume in the world, state that although Bitcoin is capable of meeting the three functions of money; being a medium of exchange, being a store of value and being a unit of accounting, it has difficulty in providing another of the characteristics of money, which is the stability of value, and they define Bitcoin as a substitute for money in some respects and even better in some respects and as “troublesome” in others.6 Çarkacıoğlu, on the other hand, in the conclusion part of his research report on Bitcoin, states that Bitcoin is increasingly replacing banknotes or digital currencies, which are traditional means of payment, and that the more widespread the system becomes, the more secure and resistant to speculation it will be7, but he refrains from making a definitive determination regarding its nature. In my opinion, it would not be wrong to extend the views of both Güven and Şahinöz and Çarkacıoğlu on Bitcoin to all cryptoassets with the same characteristics. Although this is the case in Turkey, there are similar views on cryptoassets around the world, or various views that they are commodities, or that they are investment instruments such as stocks or bonds, or that they can be considered as such.


I regret to inform readers that, when we consider the KKTC, the problem is still in its early stages. Even today, it is clear that there has been no real progress made on the legislative body’s floor, despite lawmakers’ claims that they will pass legislation governing cryptocurrencies. The scenario I addressed in the title of this article, where an employee of an office engaged in the purchase and sale of cryptoassets transfers the cryptoassets collected in the office’s electronic wallet or some of them to his own electronic wallet without the knowledge and consent of the employer, will serve as the focal point as I attempt to fill the gap that exists in the country given the legal regulations in the KKTC.

1 - Chapter 154 Penal Code8

Chapter 154 Criminal Code in force in the KKTC is a general law that was enacted in Cyprus during the British Colonial Period and is still in force today, with some amendments, in both parts of the island (North and South), which sets out rules on certain crimes and punishments and other matters relating to criminal law. Section 255(1) of Chapter 154 defines theft as; “Whoever, without the consent of the owner, by fraud and without bona fide claim, takes away anything that can be stolen at the time of taking it with the intention of depriving the owner of it permanently, commits theft.” It is defined as follows. In paragraph (3) of the Article, the term “thing” is defined as; “Anything that has value and is the property of any person, and if it is attached to immovable property, anything that can be stolen after being detached from it is a thing that can be stolen.” It is defined as follows. The definition of the term “property” is defined in Article 2 of the Law as “includes everything, animate or inanimate, which may be subject to ownership.” It is defined as follows. By looking at the definition of property in Article 2 of the Law and the elements of the crime of theft in Article 255, it would be possible to convict the employee in the cryptocurrency trading office in our scenario for the crime of “Theft by Secretary or Employee” regulated in Article 268 of the Law by accepting cryptoassets as property. However, since the Court of Cassation considers the expression “goods” as property (or money), unless cryptoassets are considered as property (or money) in any case law decision, it will not be possible to prosecute the employee for the offense of “Theft by Secretary or Employee” regulated under Article 268 of Chapter 154, let alone it will not be possible to apply Article 255 of Chapter 154 in any way. However, it is possible to say that Article 268 may find an application area if the employee takes the cold wallet, which contains the cryptoassets of the office and entrusted to him, without the knowledge and consent of the employer and this is detected. On the other hand, if the cryptoassets are found in the hot wallet, the Law and practitioners will be helpless in this situation.

2 - 32/2020 Information Crimes Act

The Law No. 32/2020 on Cybercrimes, which was adopted by the KKTC Assembly of the Republic of Turkey on 29 June 2020, is a legislation based on the Law No. 5651 in the Republic of Turkey, the articles of the Turkish Penal Code on cybercrimes and the articles regulating the crimes committed by using information systems and Article 134 of the Criminal Procedure Code (CPC), and fills the gap in this field to the extent of “better than nothing”.

The “Comment” section of Article 2 of Law No. 32/2020 particularly defines several terms in the Law in a manner that differs from the definitions they would typically have in dictionaries. Both “information data” and “data” are defined throughout the article.

Article 2 of the Law defines “information data” as any information and concept suitable for processing in an information system, including software that enables an information system to fulfill a certain function. “Data” means any value that can be processed by information systems. It is defined as follows. In the same article, “Information System” refers to a device or a series of interconnected or interrelated devices, one or more of which can automatically process data within the framework of a specific software. It is defined as follows.

Keeping these definitions in mind, and considering blockchain as the underlying technology of cryptocurrencies, for a blockchain to exist, there must be an application that requires data to be stored, the data that needs to be stored must be entered by more than one entity, and traditional databases cannot meet the needs of applications that require data entry for more than one entity.9 In short, a blockchain application requires the existence of data that needs to be stored and input by multiple entities. When we keep in mind that the blockchain consists of data blocks and that most of the data contained in the blocks (except for NFT and smart contracts) includes cryptoassets and transactions related to them, again, in the face of the fact that “cryptocurrencies (assets) are digital (virtual) currencies encrypted with cryptography”10, it is clear from what has been revealed so far that it is more possible to consider them as data and evaluate the incident in our scenario within the scope of Law No. 32/2020 than the Chapter 154 Criminal Code, which contains general provisions.

Cryptoassets are basically data, they need the existence of an electronic wallet to be traded or transferred, these wallets; The fact that these wallets contain information systems such as hardware such as USB (flash memory), which we call cold wallets, or desktop software installed by downloading to computers or laptops called hot wallets, online software usually based on cloud computing systems, and mobile software used by downloading to smart mobile phones, makes paragraph (1) of Article 6 of Law No. 32/2020, which has the subtitle “Illegally Disrupting, Deleting, Blocking or Changing the Information System or Data”, applicable to the case in the scenario. Paragraph (1) of Article 6 is applicable to the case in the scenario. Paragraph (1) of Article 6 reads as follows:

A person who unlawfully damages, deletes, destroys, alters or prevents access to information data commits an offense and, upon conviction, may be fined up to 20 (twenty) times the monthly minimum wage or imprisoned up to 5 (five) years or both.

In the event that the employee of the office engaged in the purchase and sale of cryptoassets transfers some of the cryptoassets in the electronic wallet belonging to the office to his own electronic wallet, it will be possible to bring a criminal case against him based on this article, as he will have unlawfully changed the information data in the wallet belonging to the office.

Paragraph (1) of Article 9 of the same Law, subtitled “Fraud through the Information System”, can also be applied to our scenario. Paragraph (1) of Article 9 reads as follows:

A person who unlawfully commits the following acts or gains unfair gain through these acts or causes another person to suffer loss or gain benefit commits a crime and, upon conviction, may be sentenced to a fine up to 120 (one hundred and twenty) times the monthly minimum wage or imprisonment up to 10 (ten) years or both penalties:

Entering data into information systems, transferring data from information systems, changing, deleting or blocking information data;

If the subject office employee transfers the cryptoassets in the office’s electronic wallet to his own electronic wallet in whole or in part, it will be possible to bring a criminal case against him based on this article, as he will have transferred data from the information system and at the same time changed the data.


1 - No Compensation for Procrastination!

In the face of the fact that cryptoassets created using blockchain technology have entered our lives and will continue to remain in our lives until a superior substitute comes along, the regulation of cryptoassets in the narrow sense and the cryptoasset ecosystem in the broad sense is more than a need, it is an inevitable necessity.

2 - Recommendations

I’ve provided a straightforward and likely situation about criminal law and cryptoassets above. Due to legal ambiguities, even if the disagreement at hand is quite simple, I have attempted to present a remedy that would fill the void through interpretation of the relevant legislative standards for settling disputes. This has, in part, offered a suggestion on how to deal with the issue at hand. However, it is possible that the dispute may take place in different areas of law (marriage and divorce law, enforcement law, inheritance law, corporate law, etc.) and may be more complicated. In this case, it may not always be possible to resolve the issue through interpretation under the existing legislative rules. For this very reason, it is imperative that a regulation on cryptoassets in the KKTC is implemented without delay.

At this point, I think that some viewpoints and proposals for potential legal regulations will at least have a little impact on the advancement of concepts. To group these thoughts and recommendations under a few topics;

A- First of all, a clear definition regarding the nature of cryptoassets should be made in a regulation. This definition should include the expressions “created virtually using distributed ledger technology or a similar technology and distributed over digital networks” in the “Regulation on the Non-Use of Cryptoassets in Payments”, consensus mechanisms to cover the majority of cryptoassets as much as possible, the way the assets are produced, as well as the grouping of cryptoassets according to their qualities (For example, those that have the characteristics of being a payment and investment instrument such as Bitcoin, Bitcoin Cash, Lite Coin, Monero, Ethereum, etc.; those that are suitable for being a banking and financial system instrument such as Ripple, Pancake Swap, Cardano, Tether, etc.; those that are dedicated to a relatively special purpose such as IOTA, VEchain, etc.; those that are suitable for being a banking and financial system instrument such as DOTA, VEchain, etc.). those that are suitable to be a banking and financial system tool; IOTA, VEchain, etc. that are dedicated to a relatively special purpose; DOGE, SHIBA INU, Dogelon, Mars, Mona Coin, etc. that are for entertainment purposes, Ethereum, AVAX, BINANCE, etc. that have the ability to establish smart contracts), it may be possible to prevent possible victimization by determining the competent authorities in these matters with sub-legislation in the future and, in this context, ensuring relative control. In addition, relative clarity can be provided on which institution is competent for which group of cryptoassets and how coordination will be ensured in the case of cryptoassets that fall under the jurisdiction of more than one institution due to their various characteristics.

B- Investor protection can be ensured by enacting a special legislation regarding cryptoassets offered through the ICO method. In order to be able to accept investors from the KKTC, the condition of blocking collateral for a period of time within the framework of the criteria to be regulated to an authorized institution to be determined, and if the condition is not fulfilled, it can be ensured that victimization can be prevented or at least minimized by imposing an activity restriction on the ICO project within the country.

C- Cryptoassets such as Bitcoin, Bitcoin Cash, Bitcoin Wrap, Ethereum, Monero, etc., which have a monetary value or at least an alternative to fiat money, may be considered within the scope of “Foreign Exchange” depending on the definition to be made in paragraph A- above. I believe that it is legally possible for such cryptoassets to be considered as foreign currency in accordance with Article 3 of the Money and Foreign Exchange Law No. 38/1997 in force in the KKTC (Article 3: “Foreign currency” means all kinds of accounts and documents that enable payment in foreign currency, including foreign currency).

D- Trading offices that primarily trade cryptoassets with the characteristics listed in paragraph C-above may also be considered foreign exchange offices under the Money and Foreign Exchange Law No. 38/1997 and may be given a legal status by being subject to this Law and the sub-legislation issued under this Law (Article 3: “Foreign Exchange Offices” means legal entities that are exclusively engaged in the business of carrying on foreign exchange transactions.



1 - KKTC Yüksek Mahkeme İçtihat Yayım Amiri

2 - Güven Vedat – Şahinöz Erkin, Blokzincir Kripto Paralar Bitcoin Satoshi Dünyayı Değiştiriyor, 8. Baskı,Ağustos 2021,Kronik Kitap S.44.

3 - Tanrıverdi Mustafa, Uysal Mevlüt, Üstündağ Mustafa Tahsin, Blokzinciri Teknolojisi Nedir? Ne değildir?: Alanyazın İncelemesi, Bilişim Teknolojileri Dergisi, Cilt 12, Sayı 3, Temmuz 2019, S.204.

4 - İmamoğlu Deniz Alp, Kripto Para Birimleri Ve Türk Hukukunda Düzenlenmesi, Güncellenmiş 3. Baskı, Seçkin Yayınları,2022.S.135.

5 - İmamoğlu,S.137-138.

6 - Güven – Şahinöz,S.38-39.

7 - Çarkacıoğlu Abdurrahman, Kripto – Para Bitcoin, Araştırma Raporu Sermaye Piyasası Kurulu Araştırma Dairesi,Aralık 2016,S.66.

8 - Yasaların tam metinlerine KKTC Yüksek Mahkemesi resmi sitesi olan adresinden ulaşılabilir.

9 - Tanrıverdi – Uysal – Üstündağ,S.206.

10 - Güven –Şahinöz S.85

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