Israeli Securities Authority Issues a Request for Information to Identify Regulations that May Hinder Ongoing Blockchain Industry Development

The Israeli Securities Authority (ISA) has reportedly issued a Request For Information in order to identify regulatory policies that could hinder the ongoing development of distributed ledger technology (DLT)-focused projects in Israel. The country’s regulator is also planning to look closely into the potential use cases for blockchain tech or DLT.

As the nation’s financial regulator, the ISA has established a committee to support the development of Israel’s blockchain ecosystem. The regulator aims to focus on platforms that issue and facilitate the trading of DLT-based financial securities and their associated properties, such as the use of virtual tokens and smart contracts (which are automated contracts based on business logic).

This latest initiative adds to the previous work of other committees that researched the risks involved in participating in initial coin offerings (ICO) in 2019. The researchers had identified, at that time, the need for regulatory changes to develop proper infrastructure for security token offerings, or STOs.

The regulator pointed out that blockchain or DLT “has the potential to promote the Israeli capital market.”

According to the authority, DLT may help reduce costs associated with trading securities and cut down some of the systemic risks to Israel’s economy. It could also improve access to financial markets for small-and-medium-sized enterprises (SMEs).

The committee did not find any major risks to the development of blockchain and DLT, except for the general cautiousness needed for any emerging technology. If a particular platform can meet the standard regulatory requirements including anti-money laundering (AML) and financial stability, then the regulator promises to maintain a tech-neutral approach.

The ISA has also said it’s interested in exploring the practical use cases for blockchain or DLT. It added that most of the supposed benefits of blockchain are mostly theoretical at this point, mainly because the technology is in its early stages of development and adoption.

The ISA has asked several questions in its Request for Information document, which aim to improve regulatory guidelines for blockchain in Israel. Development of financial markets is a key concern, with the ISA asking for specific provisions that might be preventing the development of a digital market in the country. Additionally, the committee has asked for more information on risks and potential applications that may be specific to the trading of blockchain-based financial securities.

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