Israel postpones cryptocurrency exchange regulations
“This decision plays into the hands of the large financial institutions”
The Finance Committee of Israel’s parliament (the Knesset) has convened a special meeting to postpone the law regulating cryptocurrency exchanges by four months.
The original law was to take effect tomorrow (1 June) and this decision means financial services providers and Israeli companies are without any regulation for these exchanges.
Last week, the Israeli Ministry of Finance, headed by Moshe Kahlon, published a draft of a prohibition on money laundering that would apply to financial services providers that operate in digital currencies.
Some saw it as a dawn for digital currency regulation for vehicles such as Bitcoin and Ethereum, and enable institutional banks to enter the field.
However, Kahlon has now asked that the new law not be passed until the addition be ratified.
He explains dryly: “The existing ordinance for the prohibition of money laundering will lapse with the passing of the new law. The process of installing the new law, which includes public hearings, will take time. Consequently there will be a period in which there will be no active legal provision concerning this matter, which will lead to a lack of clarity regarding the identification and reporting obligations imposed by the order on prohibition of money laundering.”
As you’d expect, plenty of people across Israel want to chime in.
Jacob Enoch, head of M&A at M. Firon & Co. and co-chair of the Israel Bar Association’s committee on blockchain and cryptocurrency, says: “The last minute decision to postpone the entry into force of the new legislation is nothing short of dramatic. There is no doubt that this decision plays into the hands of the large financial institutions, who, understandably, fear the competition that is certain to be generated by the entry into the sector of regulated fintech companies.”
He adds: “I am concerned that the message of instability sent by this decision could lead to stagnation in the existing Israeli fintech industry and to inhibit the launch of new start-up companies featuring innovative financial solutions. One can only hope, that such inevitable antagonism among fintech investors will not snowball into a potential loss of trust.”
Jeremy Dahan, CEO at Hello Diamonds Blockchain, adds: “We feel that there is deep disdain for the industry and its people. Close to 50 Israeli start-ups have already begun their preparations, and some have raised huge sums of money to do so. In our view, postponement is a sign of the unwillingness to make a decision. Israel is a nation of innovation, and amazing financial solutions that are under development can get stuck. The ball is in the hands of the Capital Market Authority, which needs to install an appropriate money laundering prohibition order, which can shorten the duration of the delay.”
While there may be anger, for now we have to wait and see what happens.
In a separate development, and earlier this month, the Tel Aviv Stock Exchange (TASE), Accenture and innovation centre The Floor said they planned to unveil a new blockchain securities lending platform powered by Intel.
According to TASE, there is currently no central securities lending platform in the Israeli market. Securities lending is at present executed in the capital market, primarily using inter-bank mechanisms within, and if necessary outside, banking group limits.
