In what is described as a blow to the Israeli cryptocurrency market, a law concerning cryptocurrency regulation which was supposed to be enacted on Friday has been postponed until October.
The law covers financial service providers, and for the first time includes a provision for digital asset providers. The law was welcomed by cryptocurrency customers and businesses because Israeli banks had been using the lack of legal clarity as an excuse not to serve them.
However, a draft of an addition to the law was published last week. It details specific provisions for the implementation of the law with regard to the prohibition of money laundering.
In a new development, finance minister Moshe Kahlon has requested that the new law not be passed until the addition be ratified. He said: “The existing ordinance for the prohibition of money laundering will lapse with the passing of the new law. The process of installing the new law, which includes public hearings, will take time. Consequently there will be a period in which there will be no active legal provision concerning this matter, which will lead to a lack of clarity regarding the identification and reporting obligations imposed by the order on prohibition of money laundering.”
According to local newspaper Globes, the government committee decided, following a lively discussion, to postpone the passing of the law.
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This is a blow
The Israeli Bitcoin Association released a statement saying that the decision is a significant blow to cryptocurrency startups.
Manny Rosenfield, head of the organisation, said: “The postponement of the law that deals with digital currencies will leave start-ups in the same situation, and will cause a situation in which these companies will have to think twice about whether or not to stay in Israel…This is a blow that will hamper the efforts of Israel to become a leader in a rapidly developing field of technology.”
Adv. Gil Solomon, a partner at law firm Solomon Tzur, said to Finance Magnates: “I believe that the process should be thorough enough on the one hand. But on the other hand, in order to be a jurisdiction that is appealing for cryptocurrency issuers, exchanges and traders, the process should have been shorter and more responsive. Thus, my opinion is that postponing the law may be justified but not for such a long period, as the cryptocurrency world is developing at such a quick pace that the current view may become irrelevant or obsolete in certain aspects.
[The passing of the law] is a development that will occur sooner or later. In the meantime, cryptocurrency issuers can find other means of liquidity and issue cryptocurrencies through offshore subsidiaries that are subject to such regulation which allows for responsive banking and service (which is the common practice today). This is merely an inconvenience for the issuers, because it involves higher legal and business costs and more logistics. The consumers and private traders are the ones that are actually taking the biggest hit on this since large-scale transactions may not be processed or refused by the banks.”