Israeli securities regulator moves to create a legal framework for cryptocurrencies

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As more Israeli investors become exposed to digital assets and over 150 companies are active in Israel, the regulator, the Israeli Securities Authority (ISA), has proposed a framework for regulating them.

In January 2023, the regulator published a proposal outlining its goals to achieve the “double value” of responding to the dangers of investing in digital assets while also providing the authority with the means to adopt a regulation.

Over the past few years, the authority has created a number of committees to examine and control the issuance of cryptocurrencies and foster the growth of digital markets in Israel.

The most recent committee was tasked with looking into the authority’s stance on digital asset investment products.

The proposal also included a change to the definition of “securities” to include “digital assets” used for financial investment.

The definition of “digital assets” was also expanded to include any digital “representation” of value or rights used in financial transactions.

The authority also requests the ability to regulate the market for digital assets, including the ability to set standards for issuers and intermediaries and to impose penalties for non-compliance.

The communications are now available for public comment through February 12 in the document. Additionally, it aims to make it mandatory for digital asset issuers to publish a prospectus-like document prior to issuing or registering their assets for trading.

By requiring intermediaries in the digital asset industry to abide by regulations akin to those imposed on intermediaries in the traditional securities industry, such as the requirement to hold a license and meet capital adequacy standards, investor protection is prioritized.

Aspects to address the distinctive characteristics of digital assets were also mentioned, including the use of smart contracts and the potential for tokens to serve multiple purposes.

By allowing the creation of digital asset exchanges and allowing the use of digital assets as collateral, the regulator hopes to facilitate the growth of the digital asset industry in Israel.

By giving the authority the ability to:

Shira Greenberg, Israel’s chief economist, previously provided policymakers with a list of suggestions on how to address laws governing digital assets and promote the adoption of cryptocurrencies.

Greenberg called for a more thorough regulatory framework that would bring trading platforms and crypto issuers into line and give regulators more authority to oversee the industry in a 109-page report that was submitted to the Minister of Finance at the end of November 2022.

el’s chief economist, previously provided policymakers with a list of suggestions on how to address laws governing digital assets and promote the adoption of cryptocurrencies.

Greenberg called for a more thorough regulatory framework that would bring trading platforms and crypto issuers into line and give regulators more authority to oversee the industry in a 109-page report that was submitted to the Minister of Finance at the end of November 2022.

 

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