The Tel Aviv Stock Exchange (TASE) has proposed regulatory amendments that would expand its authorized crypto trading activities to non-banking members in Israel. This move comes in response to the growing demand for digital assets and the need for regulated institutions to mitigate risks associated with virtual assets.
Overview of Non-Banking Members (NBMs)
Non-banking institutions (NBMs) are intermediaries that provide brokerage, advisory, and investment services. These entities can process several transactions, including transferring funds, but they are not allowed by law to accept direct deposits from customers or act as custodians.
Under the proposed structure, customers will be able to deposit fiat currency, which they can use to invest in digital assets. Non-banking members will act as licensed crypto trading and custodial services providers, allowing customers to trade and store cryptocurrency.
The Tel Aviv Stock Exchange has outlined explicitly that customers shall deposit fiat currencies to trade crypto, and they shall be entitled to withdraw their funds after selling their digital assets. The customer’s funds will be placed in an “omnibus account” as the intermediary for crypto trading activities.
Crypto Regulations in Israel
In November 2022, Israel’s Ministry of Finance issued guidelines to regulate virtual assets. The published recommendations were drafted with the objective of regulating and supervising the activities tied to cryptocurrency and stablecoins in a report titled “Regulation of the Digital Assets Sector: Roadmap to a Policy.”
The regulatory approach to virtual assets in Israel is to “impose regulations on financial activities or services in digital assets similar to that currently applied to non-digital assets.” The Tel Aviv Stock Exchange believes that aligning local regulations with international regulations will attract more foreign investments and investors into the Israeli market.
Despite this stance, complications remain, and the industry is facing significant regulatory changes. In January 2023, the Israel Securities Authority (ISA) released a draft proposal for regulating digital assets, and experts have suggested that the authority plans to classify cryptocurrency assets as securities.
The global regulatory outlook for virtual assets is evolving, and countries worldwide are working on regulations for the cryptocurrency industry.
The Demand for Crypto in Israel
The turbulence of the past year’s events in the crypto space has affected customer demand and the participation of regulated institutions. The Tel Aviv Stock Exchange acknowledges that despite the risks involved in the industry, the participation of these institutions and regulations will mitigate various risks associated with virtual assets.
However, regulators in Israel are imposing stringent measures, and more clarity is needed on how the proposed regulations will affect the industry. Bank Leumi, Tel Aviv’s banking institution, started offering customers crypto trading services in partnership with Paxos in 2022.
The Future of Crypto Trading in Israel
The regulatory framework aims to encourage innovation and competition while mitigating risks and protecting customers in the Israeli capital market. If the proposed draft is approved, the Tel Aviv Stock Exchange hopes to permit clients to trade cryptocurrency but needs more support.
To mitigate risks and enhance consumer protection, customers will be allowed to withdraw funds originating from the sale of digital assets, 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 proposal has been put forward for public consultation and will require approval from the Tel Aviv Stock Exchange Board of Directors.
The demand for digital assets in Israel continues to grow, and the Tel Aviv Stock Exchange aims to expand its authorized crypto trading activities to non-banking members. The proposed regulatory amendments will enable customers to deposit fiat currency and invest in digital assets, and non-banking members will act as intermediaries for crypto trading activities.
The regulatory approach to cryptocurrency assets in Israel aims to align local regulations with international regulations to attract more foreign investments and investors. However, significant regulatory changes are underway, and the industry is facing tightening measures.
Despite the complications, the Tel Aviv Stock Exchange is committed to mitigating risks and protecting customers in the Israeli capital market. If the proposal is approved, it will be another step in the advancement and development of Israel’s capital market.