Israeli Securities Regulator Set to Establish Legal Framework for Crypto

The Israel Securities Authority (ISA) offers a regulatory framework for digital assets, as an increasing number of Israeli investors are exposed to digital assets and more than 150 companies operate in Israel, according to the regulator.

The regulator has published a proposal in January 2023, outlining its goal of achieving “double value” of addressing the risks associated with investing in digital assets while empowering the authority to enact regulation.

the the authority has created several committees over the past few years to review and regulate the issuance of cryptocurrencies and promote the development of digital markets in Israel.

The latest committee was tasked with reviewing the authority’s policy on digital asset investment products.

An amendment to the definition of the term “Securities” to include “digital assets” used for financial investment have also been included in the proposal.

It was further added that the definition of “digital assets” as a digital “representation” of value or rights used for financial investment.

The authority also seeks to oversee the digital asset industry, including setting requirements for issuers and intermediaries and imposing penalties for non-compliance.

The document opened communications for public comment until February 12. It also aims to establish a requirement for issuers of digital assets to publish a prospectus-like document before issuing or registering the assets for trading.

Investor protection is prioritized by requiring intermediaries in the digital asset industry to comply with rules similar to those applied to intermediaries in the traditional securities industry, such as the requirement to hold a license and to comply with the standards of capital adequacy.

Areas for addressing the unique characteristics of digital assets, such as the ability to use smart contracts and the potential for tokens to have multiple functions, were also mentioned.

The regulator aims to facilitate the development of the digital asset industry in Israel by allowing the creation of digital asset exchanges and allowing the use of digital assets as collateral.

The risks associated with digital assets have also been addressed, such as the potential for fraud and market manipulation, by granting the authority the power to intervene if wrongdoing is suspected.

Related: Israeli court rules authorities can seize crypto from 150 blacklisted wallets

It comes after Israel’s chief economist Shira Greenberg compiled a list of recommendations policymakers on how they should tackle digital asset laws and drive crypto adoption.

In a 109-page report submitted to the finance minister in late November 2022, Greenberg called for a more comprehensive regulatory framework that would align crypto trading platforms and issuers and give regulators more power to oversee the industry.