Finance Minister Avigdor Lieberman is promoting legislation to regulate virtual currencies

The Minister of Finance, Avigdor Lieberman, is promoting legislation that will, for the first time in Israel, lead to regulation of virtual currencies. The goal is to regulate the field and fight black capital and tax evasion, which are currently estimated at hundreds of millions of shekels. It is estimated that the regulation of the field will bring billions of shekels a year into the state coffers in the future.
The Ministry of Finance held a special meeting on the subject in the Minister's Office with the participation of senior officials from the capital market, the Anti-Money Laundering and Terrorist Financing Authority, the Tax Authority, the defense establishment, the police and other parties. In the coming days, there will be advanced discussions on the subject with the heads of the Bank of Israel, but it is not yet clear exactly what the planned outline includes and how it will work.
Many traders in the country still find it difficult to bring in and withdraw money from the banks in favor of trading in virtual currencies due to the lack of instructions from the regulator on the subject - the Bank of Israel. At the end of November, the Governor of the Bank of Israel, Prof. Amir Yaron, addressed the issue, saying that "today, money from the central bank exists and is respected everywhere in the economy.
The Governor of the Bank of Israel also referred to the possibility of issuing a "digital shekel" by the Central Bank and clarified that the Bank has not yet decided whether to issue such currency or not. "As long as the central bank's money base is developed, its ability to navigate monetary policy may be impaired. Therefore, central banks have a unique role to play in preventing fragmentation and making the payment system even more uniform and efficient."
Many countries in the Western world are already dealing with the issue of regulating the crypto-economy, and in some countries, notably China, trade is completely banned. In other countries it has been decided that non-reporting of crypto transactions will become a criminal offense and even a currency confiscation. In Israel, there is already a reporting obligation on every purchase and sale transaction, and a 25% capital gains tax is imposed on it.
About a month ago, the amendment to the Anti-Money Laundering and Terrorist Financing Order came into force, which also applies its laws to service providers in a virtual financial asset. The order, which sets out, among other things, provisions relating to services provided in the field of virtual currencies, marks another significant step in the process of regulating crypto activity in the country.
The order stipulates, among other things, provisions that require the identification and verification of the recipient of the service, as well as the obligation to report to the authorities the activities of the service recipients as well as exceptional events. Meaning: Every person who operates in the country through service providers in virtual assets, such as stock exchanges and various exchanges, will be under the supervision of the authorities, like any other financial activity in the country, which is usually carried out through banks and credit companies.
The amendment to the order makes it difficult for banks in Israel, at least ostensibly, to refuse to deposit and receive funds from trading in virtual currencies. This is because the main argument used by the banks to prevent crypto activity so far has been that the source of the money is not always known and therefore they may be exposed to money laundering and terrorist financing offenses.
"The common saying that you can know where the currency is at any given moment is inaccurate. It's like cash, the maximum you can say is what wallet it was in, but not who its real owner is," explained a senior banking official. "For that matter, criminal or terrorist organizations can register their wallets on someone else and use the money for illegal acts. In addition, there are all sorts of ways to disguise the money."
At the same time, it should be emphasized that in this sense the field of crypto is very similar to cash, the use of which is of course permitted and regulated in the banking system.
Meanwhile, the Ministry of Finance and the Bank of Israel announced for public comment the establishment of a new public committee to examine the structure of financial supervision in Israel. In doing so, the main issues to be examined by the committee were published, including the future manner of maintaining the stability of the financial system in Israel, promoting competition in the financial system and maintaining the best interests of customers. The committee is headed by the director general of the Ministry of Finance, Ram Blinkov.
The establishment of the "Blinkov Committee" is based on a government decision from August this year, "in order to improve the structure of financial supervision in Israel and increase competition in the financial markets, and as part of government policy to increase productivity, promote competition, lower living costs, promote smart regulation and reduce regulatory burden ".
The committee will be headed, as stated, by Linkov, and will have members: As Deputy Chairman of the Committee, Andrew Avir, who is the Deputy Governor of the Bank of Israel, in charge of budgets at the Ministry of Finance, Yogev Gardos, Deputy Attorney General, Adv. Meir Levin, Deputy Chairman The National Economic Council, Adv. Lior Haimovich, the Chief of Staff of the Governor of the Bank of Israel, Dr. Golan Benita, and three public representatives: the former Governor of the Bank of Israel, Prof. Karnit Flug, Adv. Mia Likvernik and Prof. Sharon Hanas.
The committee will examine in a comprehensive view the entire structure of the financial supervisory authorities in Israel, the division of powers between the financial supervisors and the balance required between them in order to formulate recommendations regarding the desired structure and, if necessary, recommend legislative amendments to implement this structure.
The committee will recommend, in addition to issues of maintaining stability in the financial system, promoting competition and safeguarding the interests of customers, also issues of encouraging innovation and development of financial services and products, balancing the goals of financial supervision and promoting smart, efficient and consistent regulation, while reducing regulatory burden.
For the purpose of its work, the committee will call on the public to pass on references in relation to the issues at hand. The bidders will indicate whether they wish to appear before the committee. It will be possible to submit proposals and references to the issues that the committee will discuss by January 27.