Unlike its Western counterparts, Israel’s crypto economy still hasn’t undergone regulation, but times are slowly changing.
Since the Bank of Israel’s warnings in 2014 against cryptocurrencies, major financial regulators are now getting up to speed to fill a regulatory void.
This year alone, the Israel Tax Authority published guidelines on the taxation of cryptographic tokens, the Israel Securities Authority is in the process of standardizing Initial Coin Offerings (ICOs), and the Israel Money Laundering and Terror Financing Prohibition Authority will define Anti-Money Laundering (AML) conditions.
Israel’s first crypto law is also on its way, enabling financial service providers to trade, sell, transfer, and own crypto assets.
After much anticipation for the law to come into effect this month, it has been postponed to October 2018. The law requires financial service providers to license transacted tokens (dubbed “virtual coins” in legislative literature).
How will crypto regulation impact the local economy?
Despite the Bank of Israel’s initial skepticism, forecasters are betting on the chance that Israel’s big banks will eventually become the first to join the Israeli cryptocurrency ecosystem.
Bank Leumi is already working with Bits of Gold, a local exchange service of Bitcoin and Ethereum, to learn about the financial perks of blockchain technology.
Such collaboration is promising for private investors who hope to utilize and monetize cryptocurrencies through banks some day.
However, as banks will catch up to the cryptocurrency ecosystem, AML tools implemented by banks to monitor financial behavior are sure to put a cap on some members of the cryptocurrency community.
Meanwhile, grassroots efforts are underway to introduce cryptocurrencies to the greater public in cities like Haifa and Tel Aviv. Colu, a “new decentralized paying system”, is working to transform the concept of ‘community currency’ from voucher to real-time currency.
Coins will be used to reward community work and purchase local goods.
As Israeli society becomes exposed to the possibilities of cryptocurrencies, it is critical for regulators to understand and leverage the workings of cryptocurrencies and the blockchain.
If regulators can ultimately boost banks’ confidence in adopting cryptocurrency transactions, and businesses follow in banks’ footsteps, then crypto regulation could be the trigger to grow Israel’s cryptocurrency ecosystem and local economy.
This article was written based on the June 12, 2018 event, Regulation and Legal Challenges of Cryptocurrency Exchange in Israel, hosted by Bits of Gold.
“Karen Flieswasser gained interest in Artificial Intelligence, and other technological innovations, following her graduate studies in Philosophy of Science at the London School of Economics. She is active in the computer software industry and works primarily from the Startup Nation.”