Israeli securities regulator attempts to build a legal framework for crypto

After years of delegating responsibility to several committees, the Israeli Authority is ready to receive public feedback on its proposed crypto legal framework.

The Israeli Securities Authority (ISA) recommends a framework for regulating digital assets since, according to the regulator, a rising number of Israeli investors are exposed to digital assets and more than 150 enterprises operate in Israel.

In January 2023, the regulator issued a proposal describing its intention to accomplish the “double value” of addressing the risks connected with investing in digital assets and providing the authority with the ability to enact a rule.

Over the last few years, the authority has formed numerous committees to analyze and regulate the issuing of cryptocurrencies and to support the growth of digital markets in Israel.

The most recent committee was entrusted with analyzing the authority’s policies on investment products including digital assets.

The plan also includes a change to the concept of “security” to cover “digital assets” utilized for financial investment.

The concept of “digital assets” was expanded to include a digital “representation” of value or rights utilized for financial investment.

The authority also wants oversight jurisdiction over the digital asset business, including the ability to impose standards for issuers and intermediaries and enforce penalties for noncompliance.

The paper requests public feedback on the messages through February 12. It also proposes to mandate that issuers of digital assets publish a document similar to a prospectus prior to the issuing or registration of the assets for trade.

Investor safety is emphasized by forcing intermediaries in the digital asset business to conform with laws comparable to those imposed on intermediaries in the conventional securities industry, such as the need to have a license and fulfil capital adequacy norms.

In addition, the unique characteristics of digital assets, such as the capacity to employ smart contracts and the possibility of tokens having various functionalities, were identified as areas requiring attention.

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