Central Bank of Israel Requesting Submissions from the Public on How to Regulate “Digital Asset” Sector and DLT for Finance

The Central Bank of Israel is soliciting position papers from the general public regarding how the country should support and regulate domestic cryptocurrency/security token ventures and distributed ledger technology (DLT) for finance in the country.

The bank has assembled a team (“The Interministerial Team for Regulatory Coordination of Virtual Assets”) and has tasked it with:

“…(G)ather(ing) data and information for the purpose of creating a knowledge base on the issue(s) for regulators and the public, and in order to formulate recommendations regarding the desired regulatory policy.”

The team is comprised of representatives from the Israeli Capital Market 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 Bureau, and the Bank of Israel.

According to an associated release from the bank, “…(R)egulators of the Israeli financial system believe that there is room to renew and strengthen cooperation and coordination among all regulators and the public,” with regards to the two sectors (“digital asset” investing and DLT).

The team also wishes to, “…monitor developments in this area in Israel and abroad…” and believes that the sectors and the tech undergirding them have, “…implications for economic activity, the financial markets, and financial stability.”

The team would like interested members of the public to address the following questions:

  1. What are the main barriers, regulatory or otherwise, with which Israeli parties at interest dealing with virtual assets must deal if they wish to operate in Israel and offer their product to the domestic consumer?  If the company has previous experience operating in Israel, we would like to know what specific barriers it has encountered.
  2. What are the main barriers, regulatory or otherwise, with which Israeli parties at interest operating in the context of investing and fundraising in the area of virtual assets must deal if they wish to operate in Israel?  If the company has previous experience raising funds in Israel, we would like to know what specific barriers it has encountered.
  3. What are the main barriers, regulatory or otherwise, with which the consumers of virtual-asset-based applications in Israel must deal?
  4. What are the risks inherent in the use of virtual assets and in activity using virtual assets?
  5. What is the relevant information that regulators must gather in order to monitor developments in the industry?
  6. What are the opportunities inherent in this technology for the financial sector?
  7. How can this technology help in dealing with AML/CFT (Anti Money Laundering and Combatting the Financing of Terrorism) challenges?

Summary documents of no more than 10 pages can be emailed to [email protected] until December 31, 2018.

The committee says it can and will respond to some of the submissions but cannot respond to all.

It will also use the content and data provided in the submissions to form final recommendations and for publishing, “…unless the response includes an explicit written request to limit the disclosure or use of the information contained.”

Israel has acted as something of a powerhouse in the Middle East with its support for the crypto sector, which the country has generally supported as part of broader initiatives to transform Israel into a world-class technology hub.

The country has also had its fair share of crypto-related controversies, however, including incidents of tax evasion, alleged cryptocurrency-project frauds, kidnappings, and extortion.

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