The Tel Aviv Stock Exchange (TASE) published a draft for approval with plans to expand its authorised crypto trading activities to non-banking members. Israel’s public stock exchange suggests regulatory amendments allowing some clients to trade crypto assets. TASE, Israel’s only public equity platform that operates publicly, wants to permit clients to trade crypto but needs more support. The proposal has been put forward for public consultation.
On February 27 2023, the first announcement by The Tel Aviv Stock Exchange stated that the proposed structure would enable customers to deposit fiat currency, which could then be used for investing in digital assets. Should the proposed draft be approved, non-banking members (NBIs) will act as licensed crypto trading and custodial services providers. The customer’s funds will be placed in an “omnibus account” as the intermediary for crypto trading activities.
Overview of NBMs
Non-banking institutions (NBMs) are primarily intermediaries who provide brokerage, advisory and investment services. They can process several transactions, which include transferring funds, but they are not allowed by law to accept direct deposits from customers or even act as custodians.
NBMS will deal with two types of licensed companies, providers of custodial services and providers of trading services for cryptocurrencies. TASE has spoken explicitly about how customers shall be allowed to deposit fiat currencies to trade crypto; moreover, clients shall be entitled to withdraw their funds after selling their crypto.
On September 23 2022, Bits of Gold, an Israeli- based crypto exchange, became the first crypto firm in the country to receive a licence from the Capital Markets Authority to work with local banks. The licence allows Bits of Gold to store digital currencies through secured custody in a Bits of Gold Wallet while providing a service enabling banks and other financial institutions to connect to digital asset services.
In order to mitigate risks and enhance consumer protection, clients will be allowed to withdraw funds originating from the sale of crypto, but the process is somewhat convoluted. The proposal noted, “This is another step in the advancement and development of the Israeli capital market that aims to encourage innovation and competition while mitigating the risks and protecting the customers.” The press release stated that once comments have been submitted, they will require approval from the TASE Board of Directors. However, a time frame has yet to be provided.
The Demand for Crypto in Israel
In the press release, TASE marked the turbulent events in the crypto space that have occurred over the past year and how they continue to affect the growing demand from customers and the greater involvement of regulated institutions. TASE insisted that despite the risks involved, the participation of these institutions and regulations will mitigate various risks associated with the virtual asset industry.
Things may not go the way TASE and its crypto trading envision them; however, Israel’s regulatory outlook is becoming harsh for the sector as a proposed law plans to classify crypto assets as securities. In January 2023, the Israel Securities Authority (ISA) released a draft proposal for regulating digital assets, and experts on this Bitcode Method review mentioned that they were placing them under the umbrella of securities.
The proposed framework spoke of how Israeli regulators attempt to impose regulations on digital assets while ensuring these regulatory policies are similar to the ones set on non-digit said all assets. In February 2023, the CEO of Altshuler Shaham Horizon, an Israeli crypto trading and custody firm, said that the reclassification is changing everything and will kill the industry.
Israel’s Regulatory Stand on Crypto
Israel has participated in the cryptocurrency industry and has maintained a positive stance as a nation. With countries working on crypto regulations worldwide, the Israeli government is also pursuing the same goal.
In November 2022, Israel’s Ministry of Finance issued its guidelines to regulate virtual assets. The published recommendations were about regulating and supervising the activities tied to crypto and stablecoins in a report titled “Regulation of the Digital Assets Sector: Roadmap to a Policy.”
In the announcement, TASE stated that the current regulatory approach in Israel is to “impose regulation on financial activities or services in digital assets similar to that currently applied to non-digital assets.” The announcement added, “TASE believes that aligning local regulation with international regulation will attract more foreign investments and foreign investors into the Israeli market.”
However, the functional analysis of this system is still complicated, and more about that has yet to be revealed. The announcement mentioned that The Tel Aviv Stock Exchange continuously ensures the trading process remains safe with proper consumer protection.
NBMs will act as an intermediary for crypto trading activities if the new proposal is approved. In 2022, Tel Aviv’s banking institution, Bank Leumi, had already started offering customers crypto trading services in partnership with Paxos.
By: Hannah Parker