Crypto Asset LawEnforcement and Bankruptcy LawInformation Technology LawWho Should Be the Addressee in a Request for the Seizure of a Crypto Asset?

There is no single party responsible for the attachment of a crypto asset. The responsible party varies depending on the custody model under which the asset is held:

• If the asset is held with a crypto-asset service provider or exchange, the party responsible is the relevant platform and, where necessary, the authorised custodian.
• If the asset is held in a non-custodial wallet, there may be no central third party to whom the attachment notice can be addressed directly.
• If the asset is held in a hardware wallet, a distinction must be made between the device itself and the digital assets it provides access to.

This distinction takes precedence over the question of whether the crypto asset can be seized. The general assertion that ‘cryptocurrency assets cannot be seized’ is inaccurate. The enforceability of seizure must be assessed on the basis of the asset’s legal nature, authorisation to access it, the custody relationship and the identifiability of the person or institution against whom the seizure order is to be directed.

Under Turkish law, crypto-assets are defined in Article 3 of the Capital Markets Law No. 6362 as intangible assets that can be created and stored using distributed ledger technology or similar technology and that may represent value or rights. The same regulation defines a wallet as software, hardware, a system or an application that facilitates the transfer of crypto-assets or the online or offline storage of the private and public keys associated with them.

Based on this definition, the attachment strategy must be established across three distinct levels:

1. The debtor’s contractual or account-based rights on the platform,
2. The actual and economic control over the digital asset at the blockchain address,
3. The private key, device or other storage elements providing access to the crypto asset.

Crypto Assets on an Exchange and in a Custodial Account

Is the exchange a third party?

In the custodial model, the debtor does not directly control the crypto asset with their own private key. The asset or private key is held or managed on the customer’s behalf by the exchange or an authorised custodian. In this model, the exchange is in a position where it may be regarded as a third party, separate from the debtor in terms of attachment, and holding a right or asset belonging to the debtor.

However, the capacity in which the exchange acts must be determined by the specific contract. The exchange may:

• may be technically storing the crypto asset belonging to the debtor.
• may be liable to the debtor in response to a withdrawal or delivery request arising from the platform agreement;
• It may merely provide order routing and account management services.
• It may provide custody services through a separate authorised custodian.

Consequently, it is not sufficient to simply state ‘attachment of the exchange account’ in an attachment request. The nature of the assets held by the platform on behalf of the debtor, the customer agreement and the custody architecture must be investigated.

Is the attachment notice under Article 89 of the Enforcement and Bankruptcy Code applicable?

Article 89 of the Enforcement and Bankruptcy Code establishes a notification mechanism regarding the attachment of a debtor’s claim held by a third party or movable property in the possession of a third party. The third party is notified that they must now surrender the debt or property to the enforcement office rather than to the debtor.

In this regard, two legal classifications may be highlighted:

• As the exchange is the debtor in respect of the debtor’s request for the delivery or withdrawal of crypto-assets arising from the platform agreement, the right to the account may be attached as a claim or other right of claim.
• Alternatively, as the exchange is a third party physically holding the debtor’s crypto assets, these may be subject to the attachment notice as digital assets held by a third party.

Which of these two approaches applies depends on the platform’s custody and record-keeping arrangements and how the debtor’s balance is shown at the time of attachment. It should not be forgotten that Article 89 of the Enforcement and Bankruptcy Code is directed not directly at ‘assets on the blockchain’ but at the third party’s debt or the property in its possession.

Is an exchange account a receivable?

An exchange account cannot, in itself, be characterised in the same way as a traditional bank deposit. The relationship between the cryptocurrency service provider and the customer may encompass elements such as order execution, transfers, custody and account management.

Nevertheless, the debtor’s right to request the withdrawal of a crypto asset from the platform or its delivery to them under certain conditions may constitute an account right of economic value for the purposes of attachment. Classifying this right as a ‘claim’ or ‘other right of claim’ may provide a legal basis for directing the attachment proceedings against the platform.

In particular, if the platform’s records show a specific amount of cryptocurrency in the debtor’s account, the creditor’s solicitor should not limit the attachment application to merely ‘attachment of the debtor’s Bitcoins’; but as the attachment of all the debtor’s crypto assets, withdrawal rights, cash balances, refund claims and other economic claims within the scope of the account held with the platform.

Seizure orders against Turkish platforms authorised by the SPK

Article 35/C of the Capital Markets Law No. 6362 requires platforms to keep customers’ crypto assets separate from their own assets. This segregation is intended to prevent customer assets from being included in the platform’s assets due to the platform’s own debts. However, this provision does not mean that assets in a customer’s account cannot be seized due to the customer’s own debts.

The protection provided for in this paragraph specifically regulates the separation of assets. The platform’s own creditors may not seek to recover their claims from client assets. Conversely, should an attachment be sought to satisfy a client’s debt, the assets targeted are those held in the client’s account; not the platform’s own assets.

In practice, the following details must be clearly stated in the writ of execution issued by the enforcement office or the court:

• The debtor’s first name, surname and Turkish Republic identity number,
• The user details on the platform or their known email address,
• The date and time of the attachment,
• The balance in Turkish lira,
• The type and amount of crypto assets,
• Restriction on the authorisation to transfer funds outside the platform,
• Notification of transactions carried out after the date of attachment,
• The handover of assets to the enforcement office or their safekeeping in accordance with the enforcement office’s instructions,
• The platform’s provision of its records and transaction history.

Whether the platform will respond to a properly served attachment notice or writ depends on the nature of the document sent and the method of service. Under Article 89 of the Enforcement and Bankruptcy Code, a third party is obliged to notify, within the prescribed time limit, that they have no debt or that the property is not in their possession. Failure to do so may result in the consequences provided for by law. However, as there is no established practice regarding the legal classification of crypto-assets, the summons must clearly state ‘which right or asset is being attached’.

A notice must also be sent to the custodian

If the platform arranges for the safekeeping of client assets through a separate custodian, it may not be sufficient to write to the platform alone. Law No. 6362 regulates custodial services in the context of the safekeeping and management of private keys or crypto-assets. The records held by the custodian on behalf of the customer and the access authorisation must also be investigated.

Therefore, in a seizure request:

1. To the platform,
2. to the authorised custodian organisation designated by the platform or as apparent from its records,

separate formal notices may be requested. The relationship between the assets, private keys or account rights actually held by the custodian on behalf of the customer and the accounting records on the platform must be clarified.

As the full text of the relevant Circular III-35/B.1 is not included amongst the current research documents, this paper does not make specific references to the content of the circular’s provisions relating to custodians on an article-by-article basis. In practice, the current text of the circular and the CMB’s up-to-date regulations concerning custodian institutions should be checked separately before preparing a seizure request.

Non-Custodial Wallet

Why might there be no direct counterparty?

In a non-custodial wallet, the private key is under the debtor’s control. The wallet software or hardware is, in most cases, not a third party holding the asset; rather, it is a technical tool facilitating the debtor’s use of their private key.

There may be no single exchange, custodian or central registry capable of halting transactions on the blockchain network. A transaction takes place under the signature of the private key holder and in accordance with the network’s validation rules. Consequently, there is no addressee to whom the enforcement authority could serve a traditional attachment notice directed at all participants in the blockchain.

Here, the existence of a right must be distinguished from actual access. The debtor may have a right of control, with economic and legal value, over a crypto-asset at a specific address. However, the absence of a specific third party who could carry out the transaction or hand over the asset makes the actual enforcement of the attachment difficult.

What can the court or enforcement authority do?

A measure or notice could be considered ordering the debtor not to dispose of the seized asset, not to make any transfers using the private key, and to maintain the current status quo. However, such a decision does not alter the technical rules of the blockchain.

The issuance of a ‘transaction ban’ order on the blockchain does not mean that the network will automatically reject transactions. The legal addressee of the order is the debtor. If the debtor carries out a transfer in defiance of the order, it may not be possible to reverse the transaction on the blockchain; however, this may result in consequences for the debtor in terms of breach of the order, asset concealment or liability for damages.

Therefore, the following are effective measures in relation to non-custodial wallets:

• Imposing a clear obligation on the debtor to refrain from carrying out transactions,
• Identifying known addresses and transaction history,
• Seizing hardware, mobile phones, computers and backup devices,
• Requesting interim measures if there is a risk of transfer,
• Monitoring whether the debtor transfers their private key to a third party or diverts assets,
• Calculating the value and liability based on transaction records should be carried out should a transfer take place.

The weakness of these measures lies in the fact that, in a non-custodial structure, automatic enforcement via a third party is not possible. The decision is largely directed at the debtor’s behaviour.

Hardware Wallet

Can a physical device be seized?

A hardware wallet is a physical electronic device. Therefore, a device owned or in the possession of the debtor may be subject to seizure as movable property.

Article 88 of the Enforcement and Bankruptcy Act regulates the safekeeping of other movable property that has been seized.

This provision may allow for the physical seizure of the device. However, the seizure of the device is not the same as the seizure of the crypto assets held in the wallet.

Does the seizure of the device also constitute the seizure of the crypto asset?

As a general rule, no. A hardware wallet is a device designed to enable the secure use of a private key. The device itself;

• may not be usable without a PIN,
• may not be accessible after a reset if the seed phrase is unknown,
• may not demonstrate ownership of the address on the blockchain where the assets are held,
• The wallet can be recreated on different devices using the same seed phrase.

Therefore, the seizure of the device by the enforcement authority does not result in the crypto-assets on the blockchain coming under the control of the enforcement authority. Without the PIN and seed phrase, the device may be regarded merely as an electronic chattel. However, the device may still hold economic significance in terms of its market value, its capacity to store data, and its role in restricting the debtor’s access to the private key.

The situation changes if the PIN, seed phrase or backup access details are seized along with the device. However, the explicit inclusion of the private key in the enforcement file creates a new risk balancing the protection of the asset against the security of the secret. For this reason, the handover or safekeeping protocol must prevent the unnecessary duplication of key information.

Comparative Law

In Germany, France and the United Kingdom, practice generally varies depending on the custody model of the crypto-asset. On centralised platforms, the court or enforcement authority seeks to enforce the debtor’s account and withdrawal rights held with the platform. The platform’s identity records and account transactions facilitate the attachment of the seizure to a specific individual.

In non-custodial wallets, however, as there is no direct third-party counterparty, the obligations on the debtor to provide disclosure, declare assets, surrender them and refrain from carrying out transactions take on greater significance. The inability to locate the private key or the debtor’s refusal to disclose it may make the enforcement of the attachment technically difficult.

The separation of control over the digital asset from the physical seizure of the hardware device is a fundamental issue in comparative legal practice as well. However, practices in these countries should not be automatically transposed into Turkish enforcement law. Jurisdiction, the procedure for attachment, the classification of digital assets under private law, and the legal status of platforms within the country must also be examined.

In Turkey, there is as yet limited established case law addressing the attachment of crypto-assets that comprehensively resolves all aspects of custody arrangements. Consequently, the specification of claims and the correct identification of the party subject to attachment will be decisive.

A Roadmap for the Creditor’s Solicitor Today

1. First, determine the debtor’s type of custody: a Turkish exchange, a foreign platform, a non-custodial software wallet or a hardware wallet.

2. For Turkish platforms, consider both the attachment notice under Article 89 of the Enforcement and Bankruptcy Code and the option of a detailed attachment summons.

3. Do not use only the term ‘crypto asset’ in the writ. Specify separately the amount of crypto in the platform account, the Turkish lira balance, withdrawal and transfer requests, custody records and transaction history.

4. If it appears that the platform has outsourced its custody services to another organisation, request that a separate letter be sent to the custodian organisation as well.

5. With regard to non-custodial wallets, provide evidence of known public addresses, transaction IDs, wallet devices and the debtor’s means of access.

6. If there is a risk of transfer, request precautionary measures against the debtor and an obligation to protect their assets. Make it clear that the measure is aimed at the debtor’s conduct, not the blockchain network.

7. When requesting physical seizure of a hardware wallet, specify that the digital assets contained within the device must also be identified and safeguarded.

Today’s Roadmap for the Debtor’s Solicitor

1. Check which legal right the attachment notice relates to: a claim against the platform, assets held by a third party, or a blockchain address directly?

2. If you believe there is no balance or withdrawable assets in the debtor’s name on the platform, lodge a clear and documented objection in accordance with the time limits set out in Article 89 of the Enforcement and Bankruptcy Code.

3. Clarify the distinction between the exchange and the custodian. Request that the attachment procedure, which has been directed at the wrong party, be rectified.

4. Whilst arguing that the attachment of a hardware wallet does not constitute the attachment of the crypto assets within it, do not overlook the fact that the device constitutes movable property belonging to the debtor.

5. If it is claimed that the private key is not held in a non-custodial wallet or that the assets do not belong to the debtor, support this claim with transaction history, wallet records and a technical examination.

6. If it is alleged that the debtor made a transfer following the attachment, request an expert examination regarding transaction identifiers, timestamps and address ownership.

The correct party to a claim for attachment of a crypto asset is determined according to the custody model. In the case of a custodial exchange account, the addressee is usually the platform and, where applicable, the custodian. The debtor’s right to withdraw or receive assets from the platform may be assessed as a claim or other right under Article 89 of the Enforcement and Bankruptcy Code.

In a non-custodial wallet, there is often no direct party to the claim. Seizure may be linked not to the blockchain network, but to the debtor’s obligations regarding protection and refraining from transactions. In the case of a hardware wallet, even if the device can be seized, seizing the device without the PIN or seed phrase does not automatically confer control over the crypto assets.

The first step a creditor’s solicitor must take today is to determine, with concrete evidence, the type of custody in which the debtor holds their assets; if the assets are held in an exchange account, to send a notice of attachment or a formal letter to the platform and, where necessary, to the custodian in accordance with Article 89 of the Enforcement and Bankruptcy Code; and if the assets are held in a non-custodial structure, to separately request protective measures against the debtor.