Israeli bitcoin holders take on banks

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

A freedom of information petition has been filed demanding that the banks reveal their  policies on accounts for proceeds of cryptocurrency trading.

Holders of digital currencies in Israel, whose numbers have been growing by leaps and bounds in recent years, have an acute problem. In many cases, the local banks refuse to allow them to open an account in which to deposit money obtained from the sale of bitcoin or other cryptocurrencies.

It appears, however, that local bitcoin holders have reached the limits of their patience. They have begun to take action against the banks' refusal to cooperate with them. Several lawsuits have recently been filed against banks that refused to deposit customers' money from the sale of a digital currency, people trading in bitcoins are demanding that the Bank of Israel and the commercial banks should make their policy in this matter public.

A major step on the issue was taken this week with the filing of a freedom of information petition in the Jerusalem District Court by the Israel Bitcoin Association asking that Bank of Israel should be required to disclose to the Bitcoin Association copies of policy documents from each of the banks in Israel concerning money from digital currency, sources inform "Globes." Bitcoin Association chairman Meni Rosenfeld told "Globes" this week that the Bank of Israel had refused the Bitcoin Association's request to require the banks to publish their policy on digital currencies, saying that this constituted "commercial secrets."

The Bitcoin Association earlier issued a call to local holders of bitcoin asking anyone with relatively small amounts of digital currency whose bank had refused to deposit money in their accounts to contact the Bitcoin Association for the purpose of taking legal action in the matter. Holders of small amounts of digital currency were specified because these individuals usually lack motivation for taking their own action against the banks because of the heavy costs involved.

Sources further inform "Globes" that the Bitcoin Association is now funding a legal proceeding aimed at enabling a customer of Union Bank to deposit money from the sale of bitcoin in his account. This petition states: "The bank did not conduct an examination of the petitioner's specific circumstances. As far as the bank is concerned, the fact that the money came from the sale of bitcoin is enough to rule out in advance the option of depositing it in the petitioner's account."

No court in Israel has yet issued a ruling requiring a bank to accommodate activity by a customer dealing in digital currencies. Nevertheless, last June, as reported by "Globes," Bit of Gold, an Israeli company, posted a significant achievement - a compromise settlement with Bank Leumi bearing approval from the Supreme Court. Under this agreement, which reversed a ruling by the District Court, Bit of Gold can continue holding its account at the bank for purposes of digital currency trading.

Bitcoin Association can't open an account

The refusal of Israeli banks to provide services is not confined to private holders of digital currencies. The banks also refused permission to open an account to the Bitcoin Association, which has operated as an NPO since 2015 to promote cryptocurrency technologies. The reason appears to be the name "Bitcoin" in the organization's name. It is important to note that the Bitcoin Association does not buy or sell digital currency.

Last year, following the refusal by Mizrahi Tefahot Bank to open an account for the Bitcoin Association, the Bitcoin Association asked Bank of Israel Supervisor of Banks Dr. Hedva Ber to force the bank to open an account for it. The Bitcoin Association told "Globes" this week that Ber had answered last June that it would be allowed to open an account, subject to restrictions on accepting donations originating in digital currencies. The Bitcoin Association then once more asked Mizrahi Tefahot Bank to open an account, but has not been allowed to do so to this day.

"The law obliges a bank to provide a policy"

"In recent months, we have instituted action to obtain the policy of each commercial bank on deposits originating in cryptocurrency. We feel that there is a general policy of refusing to accept money, but the regulator is not helping us to obtain this policy. Under the Banking (Licensing) Law, it is the duty of a bank to state to the Bank of Israel the policy under which it refuses to conduct transactions. We therefore contacted the Bank of Israel and asked for this information, but the Bank of Israel did not agree to disclose this policy to us. We therefore decided to petition the court to force the Bank of Israel to provide us with a copy of the policy submitted to it by the banks," Bitcoin Association legal adviser Adv. Jonathan Klinger said.

Petition for class action against Bank Hapoalim

The legal campaign by holders of digital currencies against the banks is also taking place in other channels. Last week, a petition for approval of a NIS 75 million class action suit against Bank Hapoalim was filed in the Tel Aviv District Court. The petition alleges that the bank refused to deposit money from a customer obtained from the sale of digital currencies.

What do the banks say in response to the campaign by holders of digital currencies? Most of them are keeping mum, but this state of affairs will probably not last long. Commenting on the Bitcoin Association's petition, a banking source told "Globes," "An issue of this type, which is a complicated and system-wide matter of principle should await the stance of the Bank of Israel."

Bank Hapoalim said in response, "We are studying the petition, and will comment on its assertions in our response."

Union Bank said in response, "As a rule, the bank does not discuss legal proceedings in the media. In any case, the lawsuit was not sent to the bank. If it is sent to the bank, we will respond to it in court.

The Bank of Israel and Mizrahi Tefahot Bank did not respond to the report.

Published by Globes, Israel business news - - on August 19, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

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