Israel is dubbed as the “Startup Nation” due to its interest in technology. The country raised more than $5 billion in 2017 alone for different Israeli ventures. Interest in cryptocurrencies in Israel is visible from the various projects the country has taken part in during the last few years.
One of Israel’s largest banks, Hapoalim, partnered with Microsoft in 2017 to create a blockchain-powered platform. The purpose of creating this platform was to process financial contracts in a simple and efficient manner. There were also reports circulating in early February that Israel’s Diamond Exchange would be launching two new cryptocurrencies in an attempt to make trading more transparent. However, in February this year, ITA or Israeli Tax Authority stated that it would tax earnings on capital gains through trading of cryptocurrencies.
Cryptocurrencies in Israel & Supreme Court
In addition to tax authorities demanding taxes be paid on crypto earnings, it now appears that the nation’s Supreme Court is beginning to crack down on crypto-related activity. Notably, Israel’s Supreme Court, on 26th February 2018, handed over a decision, temporarily blocking Leumi Bank and limiting one of the local brokers, Bits of Gold, to facilitate cryptocurrency sale. Many in Israel believe this ruling will set a precedent. However, there still remains a lot of room for further development.
The judge ruling this decision made it clear that her decision did not aim to take away the bank’s right to analyze particularities of each transactions conducted from its bank accounts. Also, she added that the banks were free to take actions to minimize their risks. Thus, this may imply that brokers and cryptocurrency exchanges that operate transparently will be allowed to continue their business operations, as long as they remain in compliance with rules and regulations.
Here is how the CEO and Founder of Bits of Gold responded to the decision.
“Regulation is one of the things that has been important to us since the beginning. From the very beginning, we saw the problem with Bitcoin in terms of its anonymous characteristics, and we wanted to receive a currency service certificate—and we received it in August 2013.“
Cryptocurrencies in Israel and Regulations
If we talk about the crypto regulations, there are no clear lines of demarcation or boundaries. The focus remains on the transparency of transactions taking place within the cryptocurrency space. The first major ICO by Bancor successfully raised $150 million in a matter of few minutes. Similarly, IOTA, one of the more well-known cryptocurrency platforms has just opened its office in Tel Aviv. IOTA’s management believes it needed to have an office in Tel Aviv, because cryptocurrencies in Israel are big with some of the world’s best startups supporting them.
However, the actions taken by regulators of the country may dampen interest in cryptocurrencies in Israel. Like every other country, Israel also remains conscious about carefully regulating cryptocurrencies. Striking a balance between properly regulating digital currencies, while not stifling innovation has proven to be quite challenging.