Israel Presents Draft Crypto Legislation

The new anti-money laundering rules require companies to monitor and report suspicious activity in the sector

by Deyana Laguna
29 May • 2 min
In Regulation

Israel has taken a step forward in cryptocurrency regulation with the country’s finance ministry publishing a draft Money Laundering Prohibition Order including a provision for digital asset providers.

The draft notice, which is an addition to an existing law, explains: The definition of a service in connection with financial assets is being expanded beyond currency services, to include all activities and services performed by a business in connection with financial assets that does not include credit.

Among the financial assets added to the definition is a virtual currency, with the intention of allowing supervision of financial services other than tangible assets or standard financial means, in a field that has been developing in recent years.”

 

Suite of Reporting Requirements Regarding Clients’ Crypto Activity

 

As of June 1, all Israeli financial institutions will be obligated to report any cryptocurrency transactions that may appear to be unusual”. The legislation draft, which is dated May 23 and open for public comment until June 13, outlines 37 suspicious crypto activities, including individual transfers to digital wallets of over NIS 5000 (USD 1400), transfers made using an anonymous IP address or an address that is incompatible with the geographic origin of the connection, cryptocurrency transfers to online gambling sites, and any activity in anonymous cryptocurrencies such as Monero (XMR) or Zcash (ZEC).

The draft also states financial service providers must maintain full documentation of their clients’ cryptocurrency activity, which includes all parties’ digital wallet addresses, IP addresses, and the type and amount of currency, for a period of five years.

The proposed legislation marks the first attempt by the Israeli government to bring regulatory clarity to the crypto space. The new rules will also provide some measure of assurance that financial institutions are acting in line with the law in processing crypto transactions. Israeli banks have been reluctant to accept large deposits of cryptocurrency-related earnings due to money laundering concerns. Earlier this month, after receiving a recommendation by a Tel Aviv district court, one of Israel’s largest banks, Hapoalim, agreed to accept a USD 200 000 deposit of Bitcoin (BTC) earnings in what might become a legal precedence.