The Israeli Securities Authority (ISA) has proposed a framework for the regulation of digital assets in light of the fact that a rising number of Israeli investors are being exposed to digital assets and that, according to the regulator, over 150 businesses are already operating in Israel.
In January 2023, the regulatory body issued a proposal that outlined its purpose to achieve the double value of responding to the risks associated with investing in digital assets and giving the authority the means to adopt a regulation. The proposal’s purpose was to achieve both of these goals simultaneously.
The proposal also includes a change to the definition of the word securities, which would expand its scope to encompass digital assets that are used for the purpose of financial investment.
In addition to this, the authority intends to get the capacity to exercise oversight over the digital asset business. This would include the establishment of rules for issuers and intermediaries, as well as the imposition of punishments for non-compliance.
The document has provided a window of opportunity for the public to comment on the messages until February 12th. It also intends to create a requirement for issuers of digital assets to publish a document that is analogous to a prospectus prior to the issuing of the assets or registration of the assets for trade before the asset is made available to the public.
The protection of investors is given priority by mandating that intermediaries in the digital asset industry comply with regulations that are analogous to those that are applied to intermediaries in the traditional securities industry. These regulations include the requirement that intermediaries in the traditional securities industry hold a license and satisfy capital adequacy standards.
The capacity to employ smart contracts and the possibility of tokens having different functionalities are two examples of areas that need to be addressed in order to take into account the distinctive characteristics of digital assets.
By allowing for the construction of digital asset exchanges and by legalizing the use of digital assets as collateral, the regulator hopes to encourage the growth of the digital asset market in Israel.
The authority was given the right to intervene in situations where it was believed that wrongdoing was occurring, which helped mitigate risks connected with digital assets such as the possibility for fraudulent activity and market manipulation.
This comes as a result of Shira Greenberg, Israel’s top economist, providing a list of suggestions to lawmakers about how they should approach digital asset regulations and how they can encourage further crypto usage.
Greenberg advocated for a more comprehensive regulatory framework in a report that was 109 pages long and was delivered to the Minister of Finance at the end of November 2022. In the report, Greenberg argued that such a framework would standardize trading platforms and crypto issuers while also providing regulators with more authority to monitor the industry.