Exclusive: Bank Leumi of Israel Blocks Payment to Bitcoin Exchange

The bank claims that it is following a Bank of Israel directive regarding illegal gambling.

Finance Magnates has learned that Bank Leumi, Israel’s second largest bank, is now blocking payments to Bitcoin exchanges.

A number of users have had their payments stopped already. One user informed us that he was notified that his credit payment to ‘Coinmama’, a Bitcoin purchasing service, was blocked by Bank Leumi, which claimed that the action was by order of the Bank of Israel. The payment was attempted via Leumi Card, Bank Leumi’s credit arm.

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Coinmama allegedly a gambling site

The customer, who had previously made payments to Coinmama without issue, was informed by telephone that his latest payment was blocked because Coinmama is classified as a gambling site. He was also told that he was ‘lucky’ that his payments had been processed in the past, but now a Bank of Israel directive has closed this loop, and other banks will follow suit shortly.

He later received an official letter from Leumi Card, which said:

“As part of the framework of ongoing security activity and in light of the explicit instructions of the Bank of Israel (in accordance with the law prohibiting gambling in the State of Israel), Leumi Card monitors and blocks websites that execute gambling transactions. Leumi Card holders are not permitted to make transactions through them.”

The customer was also told by Bank Leumi that Bank Hapoalim, another major Israeli bank, does transact with cryptocurrency exchanges as of now, but that this is also due to change soon.

Finance Magnates reached out the Bank of Israel for a statement. The bank said that the law that has been in place for some years is that banks must manage their own risk when dealing with illegal enterprises. It had no comment on the legality of Coinmama specifically or cryptocurrency in general.

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This is in contrast to the information found in the letter from Bank Leumi.

In response to our request for comment, Leumi Card said: “We act in accordance with the provisions of the law and the company’s risk management policy.”

In June of this year, a troubling precedent was set for cryptocurrency exchanges. A dispute arose between Bitcoin exchange Bits of Gold and Israeli bank Bank Leumi after the latter denied service to the former.

Bits of Gold followed KYC reporting procedures, but the bank argued that the nature of cryptocurrency meant that it could not be sure who the recipients of the transactions would be, and thus could not be in compliance with anti-money laundering requirements. Tel Aviv district court ruled in favour of the bank.

Regulation not yet set

As one would expect in a country nicknamed ‘startup nation’, Israel is replete with blockchain hubs and startups. A Bitcoin ATM has been operational in Tel Aviv since August of this year. At the same time, the authorities have been lukewarm in their acceptance of cryptocurrency.

The Israeli Securities Authority has been evaluating the new industry, and the ICO craze in particular, with an eye to deciding how exactly to regulate it. Several options are under discussion, from treating digital currencies as securities to an outright ban. What is very clear though is that the authorities are keen to avoid another binary options-style scam festival.

Since the aforementioned court case, cryptocurrency exchanges have been intermittently claiming to have had incoming payments blocked, but only today has this been confirmed.


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