An advisory committee, set up by the Israeli Securities Authority (ISA) in late 2017, submitted a final report on the regulation of cryptocurrencies this Wednesday.
“The world of cryptographic assets proved to us last year that a rigorous and continuous examination of [this] dynamic and innovative field [can] enable us to make decisions that maintain the balance between the need to promote innovation and the obligation to protect [retail investors],” said ISA Chairwoman Anat Guetta. “The excitement that characterized the field in 2017 has cooled, but the technology is here to stay.”
According to a statement released by the regulator, a special committee which looked at the digital assets industry has concluded that cryptocurrencies should be regulated under Israeli securities laws.
That would mean cryptocurrency firms would be subject to an array of disclosure requirements. For instance, they would have to state any conflicts of interest and disclose all fees and commissions that clients have to pay.
More worryingly for the many b-book loving brokers that reside within Israel, the country’s securities laws also place restrictions on the firm’s proprietary trading abilities. It is unclear, however, as to whether those specific rules would be applied to cryptocurrency firms.
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A regulated cryptocurrency trading platform
Alongside the strict regulatory measures which the committee recommended, the ISA’s statement also indicates they may seek to build a dedicated cryptocurrency exchange.
“The Committee recommends,” said the ISA in a statement issued to the press, “considering the creation of infrastructure [that would allow for] the establishment of a crypto assets trading platform.”
Exactly what that platform would look like is unclear. In its report, the committee did not elaborate greatly on what it meant by ‘platform’ and said only that adjustments could be made to existing regulation to “to create a more suitable regulatory infrastructure for [cryptocurrency] trading activity.”
Regarding the issuance of cryptocurrencies themselves, the ISA’s committee said that digital assets should be treated like crowdfunding. The ISA already has a number of laws in place, dating from 2015, that govern crowdfunding.
Those laws place some caps on how much retail investors can put into a company, with looser restrictions placed on professional and institutional investors. In effect, the system works like an accredited investment in America – something many cryptocurrency firms have already taken advantage of in the US.