Bitcoin Not Security, Israeli Regulator Declares
The Israel Security Authority has declared cryptocurrencies as not securities.
A special committee tasked by the Israel Security Authority (ISA) with examining the status of initial coin offerings (ICOs) has determined that a digital currency does not qualify as a security when used only for consumption, meaning as payment without any rights involved.
The ISA set up the interdepartmental committee in August last year to review ICO regulation. Its primary task was to examine the applicability of the securities law to Israeli public offerings based on decentralized registrations. The committee was headed by ISA chief economist Gitit Gur-Gershgoren.
The committee had to study and characterize these projects, prepare a comparative review of the laws in various countries, and recommend a regulatory policy outline in areas related to securities law. At the same time, the panel had to strive for a balance between encouraging technological innovation and protecting investors.
The report concluded that a cryptocurrency used solely for consumption is not a security. Part of the document reads:
“Cryptographic currencies that confer rights similar to those of traditional securities such as stocks or bonds will be considered securities. In contrast, cryptographic currencies that embody a right to a product or service and are purchased solely for consumption and use, will not be considered a security, but only if the purpose of the actual purchase was not for investment.”
It added that cryptographic currencies would not be considered securities when intended as payment methods, clearing or exchange only, not in a specific venture. These do not confer additional rights and are not controlled by a central entity.
Yishai Trif, CEO of e-commerce payments provider Moneynetint, commented in an e-mail sent to Cryptovest:
“Distributed registration is the future of the financial world. We must not forget that technological innovation is supposed to serve the public first and to streamline the range of services. During my years in digital commerce field, I have seen how technological innovation has been deliberately delayed many times, either because of barriers or because of the inability of the institutional bodies to contain them. The decision of the committee together with Israel’s global position in the space of technological innovation may serve as a catalyst for the rest of the developed countries and lead to its welcome regulation in the use of distributed registration technology. “
Crypto firms barred from TASE
The committee’s report comes shortly after the ISA said it would bar crypto-related companies from the Tel Aviv Stock Exchange (TASE) indices.
The ISA said at the time:
“Such investment incurs many exceptional risks, including an absence of liquidity and ability to convert the currencies to money, exceptional price volatility, illegal activity, and risk of fraud.”
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