Today the Tel Aviv Stock Exchange (TASE) announced a consultation for new rules to allow non bank members, such as brokers, to provide cryptocurrency services to clients. The move is in response to a request from the Tel Aviv Stock Exchange Brokers’ Association (TBA).
One of the goals is to encourage the Israeli public to use this regulated route rather than unregulated offshore exchanges that expose them to additional risks. It also wants to attract foreign investment and investors to Israel.
Brokers would not provide cryptocurrency services directly but instead work only with licensed crypto dealers and custodians for buying, selling and custody of crypto. Only Bitcoin and Ether would be supported initially and crypto activities will be separated from others in a walled garden approach. Clients will have to sign a separate letter for crypto with the brokers that acknowledges the significant risks in the sector.
No credit can be extended to clients for crypto services. Consistent with the walled garden, crypto cannot be used as collateral against conventional securities trading.
Israel believes that the New York Bitlicense currently represents best practice in licensing and is adopting a similar approach for its own regime. The non bank members of TASE will only be able to deal with crypto exchanges that are either licensed in Israel or by the New York State Department of Financial Services (NYDFS). For custody, restrictions are similar, but approved custodians include those with a stock exchange or clearing license.
TASE first revealed plans for digital assets last October, including working with the government for tokenized bonds. In November, the Ministry of Finance published proposals for regulating digital assets. And the Israeli Securities Authority (ISA) published a consultation that means many cryptocurrencies will be considered securities because they are financial investments.