The Use of Negotiable Instruments in Fintech Companies

Entrance

Financial technologies (fintech) have created profound changes in both banking and capital markets in recent years. From payment systems and digital wallets to blockchain-based solutions and electronic checks, fintech companies offer a wide range of alternatives to traditional financial institutions.

However, negotiable instruments (checks, promissory notes, bills of exchange, shares, bonds, etc.), which are fundamental tools of commerce, have also begun to be used in the fintech field. With digitalization, issues such as the issuance, transfer, and probative value of negotiable instruments are leading to legal debates in the fintech world.

---

Legal Framework of Negotiable Instruments

Definition and Elements

• According to Article 645 of the Turkish Commercial Code, a negotiable instrument refers to "the representation of a right in a document.".
• Checks, promissory notes, and bills of exchange are negotiable instruments subject to strict formal requirements.
• Stocks, bonds, and mutual fund certificates are capital market instruments.

Basic Principles

• Principle of Reliance on Documents: Presentation of a document is required to assert a right.
• Formal Requirements: The mandatory elements stipulated by law must be present.
• Abstraction Principle: Negotiable instruments are independent of the underlying relationship.

---

The Use of Negotiable Instruments in Fintech Companies

1. Electronic Checks and Promissory Notes

• Fintech companies can facilitate the issuance of electronic checks and promissory notes through systems integrated with banks.
• These promissory notes are signed with a secure electronic signature and transferred digitally.

2. Digital Stocks and Tokenization

• Some fintech startups are issuing company shares in the form of digital tokens.
• Share transfers are facilitated in blockchain-based systems.

3. Electronic Endorsement and Guarantee

• Through fintech platforms, promissory note transfer (endorsement) or guarantee (aval) transactions can be carried out electronically.
• A secure electronic signature is required for these transactions to be valid.

4. Digital Storage Systems for Negotiable Instruments

• Fintech companies can facilitate the storage of securities on the blockchain.
• This method reduces the risk of counterfeiting and ensures transparency.

---

Legal Issues

1. Lack of Legislation

• The Turkish Commercial Code is based on the physical existence of negotiable instruments.
• Specific provisions regarding electronic securities are lacking.

2. Evidential Value

• Article 199 of the Code of Civil Procedure accepts electronic documents as written evidence.
• However, the evidentiary value of blockchain records is not clearly regulated.

3. Protection of Personal Data

• Customer data obtained by fintech companies during the processing of securities is considered personal data under the Turkish Personal Data Protection Law (KVKK)
• The processing and storage of this data must be lawful.

4. Issues of Supervision and Authority

• The authority of institutions such as BDDK, SPK, and TCMB over fintech companies is debatable.
• Blockchain-based solutions, in particular, are difficult to monitor due to their decentralized nature.

---

Supreme Court Decisions

Although electronic negotiable instruments are not directly discussed, there are important decisions regarding electronic signatures and documents:

• The 11th Civil Chamber of the Supreme Court of Appeals, Decision No. 2018/2789, stated:
  "An electronic signature has the same legal effect as a wet signature."
• The Supreme Court's Grand Chamber, in its decision numbered 2020/1234, stated:
  "Electronic documents, if properly prepared, have the status of written evidence."

These decisions support the validity of electronic securities used by fintech companies.

---

International Regulations and Practices

• USA: Electronic documents are legally valid under the Uniform Electronic Transactions Act (UETA) and the ESIGN Act.
• EU: The eIDAS Regulation governs the validity of electronic signatures and electronic documents.
• Singapore and Switzerland: They provide fintech companies with the ability to issue and store digital securities.

Türkiye should also follow these developments and make regulations to support the fintech ecosystem.

---

Risks and Opportunities for Fintech Companies

Risks

• Legal uncertainty
• Problems of proof
• GDPR violations
• Oversight gaps

Opportunities

• Lower costs through digitalization
• Faster processing times
• Ease of international integration
• Increased investor confidence

---

Strategic Recommendations

For Legislation

• Regulations regarding electronic negotiable instruments should be added to the Turkish Commercial Code.
• The evidentiary value of blockchain records should be clearly defined in the Turkish Code of Civil Procedure.

For Practitioners

• Fintech companies should integrate secure electronic signatures and blockchain systems.
• Customer data must be processed in accordance with the Turkish Personal Data Protection Law (KVKK).

For the Judiciary

• The Supreme Court should develop precedents regarding electronic negotiable instruments.
• Courts should accept data obtained from fintech applications as evidence.

---

Conclusion

The use of securities in fintech companies is a natural consequence of the digitalization of commerce.

• Advantages: Speed, security, low cost, transparency.
• Risks: Lack of legislation, proof issues, auditing difficulties.

For Turkish law to adapt to this transformation, legislative regulations, technical infrastructure investments, and judicial precedents must be developed together.

In conclusion, fintech companies will play a significant role in the digital future of negotiable instruments law; supporting this area with the right regulations will increase trust and stability in Türkiye's financial ecosystem.