Israel May Regulate Bitcoin

Warns on Risk of Investing in Virtual Currency

getty images

By Reuters

Published February 19, 2014.
  • Print
  • Share Share

Israel said on Wednesday it was considering regulation of bitcoin and warned citizens that using such decentralised virtual currencies was risky.

As a crypto-currency, bitcoin is passed between two parties digitally and can be traded on exchanges for real-world currencies. Its value fluctuates according to user demand but it is not backed by any government or central bank.

Supporters of bitcoin are drawn to its decentralised platform and say it is here to stay. Detractors call it a bubble and expect it to be forgotten in a year or two.

However, it has proved increasingly popular and governments and regulators around the world have been searching for the best way to respond.

Israel, home to pioneering firms in hi-tech fields such as cryptography, has emerged as a bitcoin hotspot, prompting central bank governor Karnit Flug to convene a meeting this week with other regulators, including those for capital markets, taxes, securities and money laundering and terror financing.

“It was agreed to continue to examine various perspectives related to the use of, and trade in, virtual currencies,” the authorities said in a joint statement on Wednesday.

“These perspectives include possible macro effects, their legal standing, their regulation, money laundering and terror financing risks, taxation and consumer protection.”

They said the Israeli public should be aware that bitcoin is unsupervised, is not legal tender and presents fertile ground for fraudulent activities. At the same time, such transactions are anonymous and often hard to trace, they added.

CRIMINAL ACTIVITY

“This anonymity is liable to be exploited for criminal activity, including money laundering, financing illegal activities and financing terrorism,” the statement said.

“Law enforcement authorities are therefore likely to close trading platforms in virtual currencies which are used for illegitimate activities, by preventing access or use of customers’ capital, which would likely be held by those platforms,” the statement added.

Other governments have also issued warnings on the use of bitcoin and New York’s financial regulator revealed plans this month to govern virtual currency firms in the state in order to protect consumers and combat money laundering.

At least two dozen Israeli startups have popped up in the past year with a view to creating tools that will allow bitcoin to be used in almost any kind of transaction - from buying shoes to issuing company stock.

In recent weeks, bitcoin was hit by attacks from unknown computer hackers that led to problems at two exchanges. They had to temporarily halt withdrawals by customers who stored bitcoins in digital wallets provided by the exchanges.

This week, a bitcoin is worth about $635, down from around the $1,000 mark in late 2013. However, it was worth only about $150 as recently as last September.


The Jewish Daily Forward welcomes reader comments in order to promote thoughtful discussion on issues of importance to the Jewish community. In the interest of maintaining a civil forum, The Jewish Daily Forwardrequires that all commenters be appropriately respectful toward our writers, other commenters and the subjects of the articles. Vigorous debate and reasoned critique are welcome; name-calling and personal invective are not. While we generally do not seek to edit or actively moderate comments, our spam filter prevents most links and certain key words from being posted and The Jewish Daily Forward reserves the right to remove comments for any reason.





Find us on Facebook!
  • Happy birthday William Shakespeare! Turns out, the Bard knew quite a bit about Jews.
  • Would you get to know racists on a first-name basis if you thought it might help you prevent them from going on rampages, like the recent shooting in Kansas City?
  • "You wouldn’t send someone for a math test without teaching them math." Why is sex ed still so taboo among religious Jews?
  • Russia's playing the "Jew card"...again.
  • "Israel should deal with this discrimination against Americans on its own merits... not simply as a bargaining chip for easy entry to the U.S." Do you agree?
  • For Moroccan Jews, the end of Passover means Mimouna. Terbhou ou Tse'dou! (good luck) How do you celebrate?
  • Calling all Marx Brothers fans!
  • What's it like to run the Palestine International Marathon as a Jew?
  • Does Israel have a racism problem?
  • This 007 hates guns, drives a Prius, and oh yeah — goes to shul with Scarlett Johansson's dad.
  • Meet Alvin Wong. He's the happiest man in America — and an observant Jew. The key to happiness? "Humility."
  • "My first bra was a training bra, a sports bra that gave the illusion of a flat chest."
  • "If the people of Rwanda can heal their broken hearts and accept the Other as human, so can we."
  • Aribert Heim, the "Butcher of Mauthausen," died a free man. How did he escape justice?
  • This guy skipped out on seder at his mom's and won a $1 million in a poker tournament. Worth it?
  • from-cache

Would you like to receive updates about new stories?




















We will not share your e-mail address or other personal information.

Already subscribed? Manage your subscription.