Public Outraged After Israel Delays Cryptocurrency Regulations
Israel’s Money Laundering and Terror Financing Prohibition Authority planned to pass legislation on June 1 that would provide banks and other financial institutions with direction on how to handle large value digital asset transfers. However, in an unexpected turn of events, the proposed legislation has been postponed until October 1.
With this delay, individuals and businesses will continue to have limited ability to cash out large cryptocurrency holdings from Israeli financial institutions, as these institutions rely on provisions that are part of an Israeli anti-money laundering law to reject large sums whose origin cannot be verified.
Earlier this year there was some relief for crypto companies as Isreali Supreme court prohibited banks from restricting crypto activities. However, in early May, Israel’s largest bank, Hapoalim, agreed to receive such a deposit of $200,000 following a court recommendation. This decision could potentially have a legal precedent for the final legislation.
According to Meni Rosenfeld of Israeli Bitcoin Association, the delay in the signing of the law leaves blockchain-based startups in a dilemma, with many considering a potential exodus from the country. With startups like eToro, Bancor (BNT) and Sirin Labs (SRN), the rapidly growing Israeli Blockchain ecosystem is at serious risk.
When asked about the delay, Isreali Bitcoin Associations’ Co-Chair Jacob Enoch emphasizes the dangers of the language used by the Israeli regulators.
“The reason for the delay is the lack of a prohibition on money laundering, which implies that these companies have not been mindful of, and have not acted to prevent, money laundering to this day. This is something that is not acceptable to say about an entire market.”
“There is no doubt that the beneficiaries of the postponement of the law are the institutional bodies, which fear the competition that will be created with the entry of fintech companies licensed for services in financial assets. I am concerned that instability in such important decisions could lead to stagnation in existing fintech companies and delay the start of new companies with innovative financial solutions. Even worse, this creates antagonism among fintech investors in Israel, which could snowball into a loss of trust.”
Online gambling, a strictly prohibited activity in Isreal, was given special attention in the draft legislation for any “unusual transactions involving cryptocurrency to online gambling platforms and websites.” The country has become a destination for online gambling companies which has drawn negative attention from the government.
The draft of the legislation is open to public purview until June 13 and would require the signature of Israel’s minister of finance before it can come into effect as law in October.