In early January 2023, the ISA (Israel Securities Authority) said that it would create a new legal structure for cryptocurrencies. Notably, the country’s legislation will be changed to include cryptocurrency and digital assets within the current securities laws. According to the proposal, most cryptocurrencies may fall under financial assets under the ISA’s watch.
According to Ilan Sterk, the CEO of Altshuler Shaham Horizon, an Israeli cryptocurrency service provider, the proposed rules will destroy the asset class. The Tel Aviv-based company offers digital asset custody and trading services. Moreover, it is one of the few firms in the nation that has bank-dealing authorization.
Sterk said that classifying digital assets as securities will change everything. However, Sterk himself is not sure if the proposed changes will make it into law. He stated,
“You cannot classify all the digital assets as securities because it will kill the industry.”
Israel’s cryptocurrency regulation proposal
The ISA proposes to include “digital assets” used for financial investment in the definition of securities. Additionally, the term “digital assets” was defined more precisely as a digital “representation” of value or rights used in financial investment.
Moreover, the Israel Securities Authority also wants the authority to regulate the cryptocurrency market. They also want to create standards for intermediaries and issuers and enact penalties for non-compliance. Therefore, before issuing or registering digital assets for trade, issuers would have to publish a document akin to a prospectus under the ISA’s proposal. The agency also underlined that rules should be flexible to keep up with advancements in cryptography.
Israel’s Ministry of Finance released its suggestions for laws governing the cryptocurrency business in November of last year. One of the suggestions would let cryptocurrency service providers run their businesses in Israel, at least temporarily, if they also held a counterpart license from another country.
The citizens have until Feb. 12th to give feedback on the proposed legislation. The ISA suggests waiting six months after receiving the go-ahead before implementing it fully.