Israeli crypto exchange receives capital markets license in country first

Israel-based crypto exchange Bits of Gold became the country’s first crypto firm to receive a license from the Capital Markets Authority, according to the company’s social media posts Sept. 18.

As a result of obtaining the license, Bits of Gold will be able to store digital currencies through secured custody in a “Bits of Gold wallet” that they have been working on for some time. It will also begin providing a service that will allow banks and other financial institutions to connect to its digital asset services.

In a public statement, Bits of Gold said the license is the next step in its mission to bring the world of digital currencies more accessible to the Israeli public “in an easy and secure way.”

Authorities in Israel have restricted cash payments in the country in a bid to combat illegal activities and encourage the transition to digital payments within the country.

Despite this, institutional acceptance in the country has been slow, as until recently Israeli banks have been very unfriendly towards crypto and blocking services, citing anti-money laundering (AML) issues.

In 2017, the Israeli Supreme Court ruled that local bank Leumi had legal standing to refuse bits of gold, with the bank claiming that the nature of bitcoin made it impossible for them to meet ALM requirements.

However, the Supreme Court’s position had changed by 2019, when it ruled that Leumi could not suspend Bits of Gold’s account due to regulatory concerns, setting a precedent for other cryptocurrency firms.

The government’s enforcement of new AML regulations in Israel has further paved the way for collaboration between banks and the crypto industry. The development also laid down the requirement for crypto businesses to be licensed, although companies that applied for one were granted permission to temporarily continue operating.

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Another obstacle to institutional adoption in Israel is the tax laws. The country was recently ranked as the third-worst country for crypto taxation, according to a report by crypto analytics firm Coincub published on Sept. 8.

According to Coincub, selling crypto in Israel is generally subject to a capital gains tax of up to 33%, and if the investment activity is deemed business-related, it is subject to an income tax of up to 50%.

While earlier this month the Capital Markets, Insurance and Savings Authority had already granted Israel’s first crypto license to infrastructure company Hybrid Bridge Holdings, the license Bits of Gold received is the first to be granted to an active broker.