Amendments Proposed in Existing Securities Laws of Israel
Israel Securities Authority (ISA) is the exclusive regulator of securities whose jurisdiction spreads all over Israel.
ISA has taken note of the rapidly expanding digital asset market in the country and is now concerned with industry regulation.
It is hence proposed by ISA that existing securities laws need to be amended for incorporating provisions with regard to digital assets.
ISA pointed out that digital assets, particularly cryptocurrencies, are being used by a segment of society in the country for investment purposes.
ISA argued that the use of such assets for investment is neither governed nor regulated by any regulatory authority. It then said that for protecting the interests of the investors, regulatory oversight of digital assets is a must.
To achieve the intended task, ISA has proposed several provisions in the existing legislation pertaining to securities.
Digital Assets as “Securities”?
ISA’s proposal to amend the existing legislation is solely for the purpose of bringing digital assets under regulatory oversight.
The regulator has proposed to define ‘digital assets’ in a manner that they represent values in digital/virtual form.
The definition of ‘digital assets’ shall be added to the definitions where financial instruments have been individually defined.
ISA commands exclusive jurisdiction and regulatory oversight over all financial instruments as have been listed in the legislature.
ISA’s View on Digital Assets
It is the view of ISA that cryptocurrencies in particular are very much the same as ‘conventional securities’. However, ISA acknowledged that though crypto can be used as means of investment, yet they differ in forms and uses.
ISA then suggested that the current law does not cater to all the use cases of digital assets and hence amendment is necessary.
If cryptocurrencies have to be granted full operational access, then it is important that the necessary amendments are made.
ISA’s Goal Is to Safeguard Investors’ Interest
The regulator has further apprised that the true objective behind amending existing securities law is to safeguard and protect investors’ interests.
ISA noted that there are inadequate safeguards for the investors who are involved in the trading of digital assets.
Things need to be streamlined and laid out in the right manner so they do not find it difficult to deal with such matters. Investors must feel protected and have peace of mind when interacting with cryptocurrencies.
This is something that they want to offer the investors and for this purpose, it is important that strict regulatory reforms are made to the cryptocurrency regulatory framework.
ISA then proposed regulating digital assets in the manner of “securities” even though they aren’t registered with any stock exchange in Israel.
Under Israel’s law of securities, all securities are required to be registered as ‘securities’ with either parent or regional stock exchanges.
Without registration, security cannot enter into any trading market whatsoever in the country.
Publication of Amendments
It may be noted that ISA has prepared the draft amendments in the securities laws which were officially announced on 4th January 2023.
Currently, the proposed amendment requires comments and feedback from the public as required under the laws of Israel. The deadline for submission of comments is set as mid-February i.e. 15th February 2023.
Under the Israeli legal framework, at least 180 days are required for rules to be implemented after their approval.
ISA also told that the country’s Finance Ministry also had recommended amendments in writing to the regulator in November 2022.
It was informed by ISA that Ministry’s recommendations have been duly incorporated in the proposed draft of crypto rules.
It was the view of Israel’s Finance Ministry that digital currency trading is risky and can lead to irreparable financial loss.
The Ministry also stressed the need for clearer and unambiguous crypto rules and regulations. It warned that investors’ protection should be the first priority of ISA.