The Israel Securities Authority (ISA) is proposing a framework to regulate digital assets as more Israeli investors are exposed to digital assets, and more than 150 companies operate in Israel, according to the regulator.
The regulator released a proposal in January 2023, outlining its aim to achieve “double value” to respond to the risks associated with investments in digital assets and authorizing the implementation of regulations.
The authorities have created several committees over the past few years to review and regulate the issuance of cryptocurrencies and promote the development of the digital market in Israel.
The latest committee was tasked with reviewing the authority’s policy on investment products in digital assets.
Amendments to the definition of the term “securities” including “digital assets” used for financial investment are also included in the proposal.
In addition, the definition of “digital asset” is a digital “representation” of value or rights used for financial investment.
Authorities are also seeking powers to oversee the digital asset industry, including setting requirements for issuers and intermediaries and imposing sanctions for non-compliance.
The document has been open for public comment until February 12. It also seeks to establish requirements for issuers of digital assets to publish documents such as prospectuses before publication or registration of assets for trading.
Investor protection is prioritized by requiring intermediaries in the digital asset industry to comply with the same rules that apply to intermediaries in the traditional securities industry, such as the requirement to hold a license and meet capital adequacy standards.
Areas to address the unique features of digital assets, such as the ability to use smart contracts and the potential of tokens to have multiple functions are also mentioned.
The regulator aims to facilitate the development of the digital asset industry in Israel by allowing the establishment of digital asset exchanges and allowing the use of digital assets as collateral.
Risks related to digital assets are also addressed, such as the potential for fraud and market manipulation, by authorizing intervention in cases of suspected wrongdoing.
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This comes after Israel’s chief economist Shira Greenberg presented a list of recommendations for policymakers on how to deal with digital asset laws and crypto adoption.
In a 109-page report submitted to the Finance Minister at the end of November 2022, Greenberg called for a more comprehensive regulatory framework that would bring trading platforms and crypto publishers into line and give regulators more power to oversee the industry.