The Israeli Securities Authority, the financial regulatory authority of Israel, today proposed an amendment to Israeli law which would temporarily limit the ability of cryptocurrency-related firms to enter the stock exchange, according to an ISA press release.
The proposals are as follows:
1. Stock exchange indices will not include any firm whose main activity is the investment, holding or mining of cryptocurrencies.
2. Securities of such companies will not be listed on the exchange, and if they are listed will be removed. Exception will be made for companies whose shareholder equity exceeds NIS 100 million, and whose financial statements have been reviewed or audited for a period of 36 months.
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Shmuel Hauser, Chairman of the ISA, said: “The proposal comes against a background of irregular trading in securities, to such an extent that there are jumps of thousands of percent in share prices even before there is any actual activity from which results can be estimated. The proposal is to issue a temporary amendment, which will allow for examination and special regulation.”
These drastic jumps concern the regulator because they indicate a lack of connection between share prices and real value, which could lead to shares behaving irrationally and unexpectedly. This means that there is a risk of undermining the fairness and reliability of the stock exchange, which could effect investor confidence.
The announcement says that the ISA recognises the value of cryptocurrency and blockchain technology: “This field is still in its infancy and carries great positive potential for technological, financial and business innovation.” The regulator has set up a committee to examine the issue – specifically, how it should be governed in terms of taxation, and prevention of money laundering/terrorism funding.
The ISA emphasises that the proposed amendments do not relate to cryptocurrency itself, which is already being examined by the aforementioned committee, “but rather the current attempts to introduce speculative activity in the cryptographic currency sector, particularly direct investment or mining of currencies in anticipation of appreciation.”
The ISA is referring here to securities trading, which has already been launched on a couple of exchanges in the US and is being considered by a few major exchanges around the world. The ISA says that because there do not exist in Israel adequate laws to control such products, the stock exchange would be exposed to a popular and unstable contract, exposing investors to great risk.
The ISA requests comments from the public on the subject.