Anat Guetta, Chairwoman of the Israel Securities Authority, has announced a new approach to cryptocurrency regulation in Israel, according to local paper Calcalist. The process will include a sandbox which startups will use to test their products in a relatively easy environment.
The ISA said in a statement that it is “…examining the establishment of a regulatory environment that makes it easier for companies that use new technology to supply financial products and services. It is possible that this may also be relevant to companies that issue distributed cryptographic coins.”
In order to examine the issue, the ISA set up a committee of lawyers and consultants, and three possible approaches emerged.
The first was based on the system currently found in the US, that is, securities-oriented. ICOs there are defined on a case by case basis, and if an ICO is found to be a security it has to follow all relevant laws, including the requirement to submit a detailed business plan.
The second model, which the report calls Swiss, calls for specific legislation for cryptocurrency irrespective of whether a specific product can be called a security. The Swiss watchdog (FINMA) recognises three categories for tokens – payment, utility, and asset. The last of these is considered a security. A token exchangeable for a service and not a product is generally not, but tokens that afford voting rights to holders are, according to the report.
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The third model is based on mass financing, and allows the raising of capital from the public.
Guetta has decided that the first model, combined with a regulatory sandbox, is apropriate for Israel.
This model is already close to what is already in place in the country, but the agency wishes to add to the regulation process a grace period during which startups would benefit from easing measures such as permission to advertise on the internet (which is currently not allowed) and permission to submit a shortened white paper.
The authority said that an interim report will be published for public comment soon. The decision was originally supposed to be published in January, but the handover from previous chairman Shmuel Hauser to Guetta delayed the release.
A change of direction?
Towards the end of his term Shmuel Hauser had been fairly negative towards cryptocurrency, treating the new industry with suspicion. Today’s announcement could signal that the agency’s new head intends to be more welcoming to cryptocurrency in the country.
We reached out to the ISA on this subject, and a spokesperson said that before the policy proposal is released, no conclusion can be drawn regarding a change in attitude.