Israel: Steps Toward Cryptocurrency Support?
In terms of technological innovation, Israel has been labeled by some as “The Startup Nation” with Israeli ventures raising over $5 billion in capital in 2017. This is almost 10% of China’s yearly fundraising total. While there’s a number of popular applications, platforms, and products including USB flash drives, the Waze navigation app, SodaStream carbonation machines, the country has set its foot in the crypto industry as well.
Back in 2017, Hapoalim, Israel’s largest bank, partnered with Microsoft to create a Blockchain-powered platform to “make the process of signing up guarantors simple and quicker.” And in February 2018, the Israeli Tax Authority (ITA) stated that cryptocurrencies will be taxed by the capital gains as properties.
On February 26, 2018, the country took it even further, when the Israeli Supreme Court handed down a decision that would temporarily block Leumi Bank, limiting a local broker, Bits of Gold, from facilitating the sale of cryptocurrency.
Though many were quick to laud the temporary ruling as ‘precedent-setting,’ it still leaves ample room for further developments. The judge ruling the case, Anat Baron, said that her decision was “not intended to harm the bank’s rights to analyze with specificity every transaction that takes place with the bank account or to take any actions that are related to minimizing risks.” This likely means cryptocurrency brokers and exchanges putting transparency first will be regarded as lawful—for now.
This is significant progress from December of last year, when a Tel Aviv district court ruled in favor of Leumi Bank, who had refused service to Bits of Gold because of Bitcoin’s inability to meet anti-money laundering standards. Bank Leumi had also been piggybacking on the Bank of Israel’s June labeling of exchanges as “websites that facilitate gambling transactions”, which is a sore spot for Israel especially. The country proved to be careful about upsetting the balance within its borders, and even blocked popular ride-sharing application Uber from an Israeli debut.
After examining the last five years of Bits of Golds’ operations, Judge Baron determined Leumi’s previous assumption that violations of the law would occur if Bitcoin were left unchecked were false.
Regardless of how regulators will respond, it’s already clear that progress on Israeli blockchain innovations hasn’t slowed.
“As with any new and promising technology, jurisdictions that instate well-balanced policies to promote innovation and adoption, will find themselves attracting talent and business to their ecosystems on grand scales. The best frameworks will be the ones that take a learning approach, allowing entrepreneurs and institutions to deeply understand how these technologies affect all stakeholders and develop the policies which are beneficial to most while educating the public on tradeoffs and accountability. Israel has always seen the advancement of technology as a strength and opportunity, and is well positioned to lead in Blockchain development and applications,” said Galia Benartzi, Co-founder of Bancor.
Itay Nagler, Israeli citizen and CEO of blockchain-driven travel startup Cool Cousin, says that Israelis, as a default, undercut the perception that things can't or shouldn't change.
Even though there were no concrete regulations of the industry before, it didn’t stop entrepreneurs from launching blockchain projects of their own. Bancor was one of the first major ICOs, raising over $150 million in mere minutes, and has its origins in Israel. IOTA, an IoT-focused Blockchain solution, recently opened an office in Tel Aviv, noting that the city is “a well-established tech hub, always ranking in the top 10 of start-up reports.”
These positive changes, however, go contrary to the recent decision by the Israeli regulators of not including companies involved in the crypto industry in the TASE, Tel Aviv Stock Exchange indices, due to its ‘trading volatility.’
Israel appears to be setting itself in the Blockchain ecosystem, along with the rest of the world, but tries first guarantee that the market’s grey areas be limited while its most useful attributes allowed to flourish.
For future viewers: price of bitcoin at the moment of posting is 7663.60USD