The Israeli Securities Authority is moving to establish a new legal structure for digital assets that puts them under the authority’s umbrella.
As more Israeli investors become exposed to digital assets and over 150 companies are active in Israel, the regulator, the Israeli Securities Authority (ISA), has proposed a framework for regulating them.
In January 2023, the regulator published a proposal stating its goals to accomplish the “double value” of responding to the dangers of investing in digital assets while also providing the authority with the resources to enact a regulation.
Over the past few years, the authority has created a number of committees to evaluate and control the issuing of cryptocurrencies and foster the growth of digital markets in Israel.
The most recent committee was entrusted with looking into the authority’s stance on digital asset investment products. The plan also includes a change to the definition of “securities” to include “digital assets” utilized for financial investment.
The concept of “digital assets” was further expanded to include any digital “representation” of value or rights used in financial transactions.
The authority also requests the ability to regulate the market for digital assets, including the ability to set standards for issuers and intermediaries and to impose penalties for non-compliance.
The communications are now available for public comment through February 12 in the document. Additionally, it aims to make it mandatory for digital asset issuers to publish a prospectus-like document before to issuing or registering their assets for trading.
By requiring intermediaries in the digital asset market to abide by regulations akin to those imposed on intermediaries in the traditional securities business, such as the necessity to obtain a license and meet capital adequacy norms, investor protection is prioritized.
Aspects to address the distinctive characteristics of digital assets were also discussed, including the usage of smart contracts and the potential for tokens to serve various purposes.
By authorizing the creation of digital asset exchanges and allowing the use of digital assets as collateral, the regulator hopes to encourage the growth of the digital asset market in Israel.
By giving the authority the ability to act when wrongdoing is suspected, risks related to digital assets were also addressed, such as the possibility of fraud and market manipulation.
Shira Greenberg, Israel’s chief economist, previously provided lawmakers with a list of suggestions on how to address regulations governing digital assets and promote the adoption of cryptocurrencies.
Greenberg argued for a more thorough regulatory framework that would bring trading platforms and crypto issuers into line and provide regulators more authority to regulate the industry in a 109-page study that was delivered to the Minister of Finance at the end of November 2022
