Former Israeli Prime Minister Ehud Barak and current PM Benjamin Netanyahu believe that blockchain is a potentially a game-changing technology. They expect it to disrupt big sectors of the economy — healthcare, banking, insurance, and cybersecurity among them.
Under their leadership, several government departments and agencies in Israel have taken steps to invest in blockchain technology where applicable, by funding blockchain startups. They have also been forging ties in emerging blockchain economies such as China, Korea, Singapore, Switzerland, and the Marshall Island.
Among the government agencies involved in Israel’s promotion and oversight of cryptocurrencies are:
Central bank of Israel
Israel Tax Authority
Ministry of Finance
Israel Securities Authority
Capital Market Authority
These agencies are coordinating regulation of cryptocurrencies, in part by monitoring developments in Israel and abroad. The primary goal is to find a path whereby blockchain contributes to the country’s financial markets and their stability, and make policy and regulatory recommendations about adapting Israel’s government infrastructure to blockchain and cryptocurrencies.
The Israeli Supreme Court last year helped clear the way forward. In a case of first impression, it ruled that most banks cannot limit or restrict the accounts of companies associated with the cryptocurrency/blockchain industry. The Israeli Supreme Court also rejected the appeal of a law banning binary options.
The Israel Securities Authority (ISA) published its final report on cryptocurrency regulations on March 7, designed both to develop the crypto sector and protect the rights of investors. The new regulations impose disclosure requirements for crypto offerings that qualify as securities and call for the establishment of regulatory sandbox and the creation of a special platform to trade cryptocurrencies under enhanced regulation.
The ISA also implemented a blockchain based messaging system between itself and the other departments under its umbrella to address cybersecurity concerns.
Still, there are risks to Israel’s strategy. Warren Buffett has famously warned that the sole way most Bitcoin users will realize value from their holdings is by “attracting charlatans” through new entrants into the market.
Perhaps proving Buffett’s point, last May Israeli prosecutors in the cybercrime division of the state attorney’s office in Hebron filed the country’s first indictment against a cryptocurrency money launderer who laundered $8.7 million in Bitcoin, Ethereum, and DogeCoins over the course of ten years.
The indictment included a confession by the space-age cryptocurrency money launderer, who admitted: “We are thieves. Anywhere we can take money, we will, no matter where from — Israel, the United States, even the moon.”
Selva Ozelli, Esq., CPA is an international tax attorney and CPA who frequently writes about tax, legal and accounting issues for Tax Notes, Bloomberg BNA, other publications and the OECD.