BoI seeks public responses on cryptocurrency regulation

Litecoin, Bitcoin  photo: Shutterstock

Bank of Israel: Regulators want to renew and strengthen cooperation with the public.

Today, a little over a month after the Bank of Israel published a report by an inter-divisional team assessing the subject of digital currency offerings by central banks, the Bank of Israel published a call to the public for information for the team for the purpose of coordinating regulations of virtual assets.

In the report, published in early November, the team stated, "There are expected to be quite a few material and technological difficulties and risks in the issuance of central bank digital currencies (CBDC), which mainly concern the potential impact on the financial system." As reported in "Globes," the team therefore recommended against issues of digital shekels in the near future.

Today's announcement states, "In pursuance of the regulatory activity conducted to date by all of the relevant parties in their fields of responsibility and authority on the subject of virtual assets, and given the development of the industry in Israel, which is considering various uses and applications based, among other things, on distributed ledger technology (DLT), the regulatory community of the Israel financial system believes that cooperation and coordination between regulators and the public should be renewed and strengthened."

The Bank of Israel adds, "The team wishes to keep track of developments in the matter in Israel and overseas, and to assess the issues pertaining to applying regulation to the various uses of the technology and their consequences for economic activity, the financial markets, and financial stability. The team will gather data and information in order to create a knowledge base on the subject for the regulators and the public, and in order to formulate recommendations about the desirable regulatory policy."

Seven main questions to be examined

For this reason, "The team members, who include representatives of the Capital Market, Insurance, and Savings Authority; the Israel Securities Authority; the Ministry of Finance; the National Economic Council; the Israel Tax Authority; the Ministry of Justice; the Israel Money Laundering and Terror Financing Prohibition Authority; the National Cyber Directorate; and the Bank of Israel, are asking for comments from the public about the issues that should be addressed in considering regulation of the use of virtual assets and possible measures related to these issues."

Among the issues that that team wishes to discuss, the announcement lists seven main questions. The first is, "What are the main regulatory and non-regulatory barriers faced by interested Israeli parties dealing in virtual assets who wish to operate in Israel and offer their product to the local consumer? If a company has previously attempted to operate in Israel, we want to know what specific barriers it encountered."

The second question listed by the Bank of Israel was, "What are the main regulatory and non-regulatory barriers face by interested Israeli parties seeking to raise money through initial coin offerings (ICO) when attempting to operate in Israel? If an attempt was previously made to raise money in Israel, we want to know what specific barriers were encountered by these interested parties."

A third question asks, "What are the main regulatory and non-regulatory barriers faced by consumers of applications based on virtual assets in Israel? What are the risks incurred through the use of and activity in virtual assets? What relevant information should the regulators collect for the purpose of monitoring the industry's development? What opportunities does this technology offer the financial sector? Finally, how can this technology help cope with the challenges pertaining to anti-money laundering and counter-financing of terrorism (AML/CFT)?"

"Daily difficulties in using currencies"

In response to the today's appeal by the Bank of Israel, Israel Bitcoin Association chairperson Meni Rosenfeld said, "Users of digital currencies in Israel encounter daily difficulties in conducting transactions with their currencies. For example, if a person who has bitcoin wants to pay for a meal with the currency, the law states that he must report the transaction, and also pay tax on the sale of the bitcoin he used in the purchase. Because of this ridiculous case, the Tax Authority is liable to swamped with thousands of unnecessary reports, or thousands of people using the technology are likely to unwillingly become criminals."

Rosenfeld added, "The Bank of Israel's measure is welcome, and I hope that all the difficulties and barriers will be arranged, so that holders of digital currencies can use them, especially at the level of the individual user."

As the year draws to a close, it can be stated with virtual certainty that bitcoin will finish the year with its first annual decline since 2014, after gaining ground in each of the three preceding years. As reported in "Globes," Monday was the anniversary of the date on which bitcoin, the leading digital currency, broke its all-time record with a price of just over $20,000. In the succeeding 12 months, bitcoin's decline was prolonged and painful. Its current price is now $3,590, following a 4% jump in one day.

Published by Globes, Israel business news - en.globes.co.il - on December 19, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

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Litecoin, Bitcoin  photo: Shutterstock
Litecoin, Bitcoin photo: Shutterstock
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