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Since early 2018, Israeli regulators have worked to understand the nature of digital currencies and ICOs and to decide whether crypto-related companies can register on the country’s Tel Aviv Stock Exchange (TASE).
Regulators have apparently reached a conclusion on the matter, as a special committee formed by the Israel Securities Authority (ISA) determined that cryptocurrencies generally do not qualify as securities when used solely for consumption—meaning as a means of payment without any associated rights.
The ISA committee stated, ‘As a general rule, cryptocurrencies designed solely for use as a medium of payment, clearing, or exchange—not tied to a specific venture, not granting additional rights, and not controlled by a central entity—do not qualify as securities.’
Last year in August, the ISA had set an interdepartmental committee, headed by ISA chief economist Gitit Gur-Gershgoren, whose main job was to determine whether the securities law is applicable to the Israeli public offering on decentralized registrations.
Regulators Seek Balance Between Innovation and Investor Protection
The task of the committee was to characterize and study these projects while making a comparative review of the law of different countries and thus formulate a regulatory policy outline. However, the regulators aimed to maintain a perfect balance between protecting investors’ interests and encouraging technological innovation at the same time.
The project in its report concluded that digital currencies used with the sole intent for consumption are not a security.“The report explains: ‘As a general rule, cryptocurrencies that grant rights similar to those of traditional securities—such as shares, bonds, and participation units—qualify as securities. In contrast, cryptocurrencies that provide access to a product or service and are acquired solely for consumption or use, not for investment, do not qualify as securities.’“
Many analysts are saying that this is certainly a precedent-setting decision while government and regulatory bodies across the globe are struggling to classify digital currencies. The committee submitted the report’s recommendations to the newly appointed ISA chairwoman, Ms. Anat Guetta. In the past, Ms. Guetta has expressed some hostility toward cryptocurrencies and announced that the ISA will take every step to prevent crypto-related companies from registering with the Tel Aviv Stock Exchange (TASE).
She said: “We have decided to prevent the exposure of passive investors to companies whose main activity involves cryptocurrencies. Investment in these companies is high risk, speculative and volatile. We also published a detailed warning to investors about the dangers of investing in cryptocurrency.”