Israeli Securities Authority Establish Committee to Consider ICO Regulations

The head of the Israeli Securities Authority (ISA) has announced the establishment of a committee tasked with assessing the need for ICO regulations in Israel. The committee has been assigned to determine whether or not initial coin offerings fall under the purview of securities legislation.

The New ISA Committee Has Been Tasked With Assessing If ICOs Should Fall Under the Legislative Apparatus Governing Securities Trading in Israel

The new ISA committee is expected to submit its assessments regarding ICO regulations by December 31st, 2017. The committee is to be headed by the head of the ISA’s Corporate Department, Moti Yamin, and ISA chief economist, Dr. Gitit Gur-Gershgoren. The committee is reported to have been tasked with five specific directives:

1. Evaluate the financial essence of ICOs and whether it overlaps with other financial activity under Israeli law;
2. Make a comparative analysis of cryptocurrency regulations in various countries to evaluate the legitimacy of Bitcoin;
3. Examine if cryptocurrency trading and ICOs should be watched by the ISA;
4. Devise a new regulatory policy balancing between alternative funding channels and technological innovation while protecting Israeli investors from unsupervised investments; and
5. Examine potential collaborations with fellow regulators and with the local Blockchain industry.

The Israeli Securities Authority has alleged that over $1billion USD was raised during the first half of 2017 through ICOs. The ISA believes that “Israel is considered as a leading country in blockchain technology development with a flourishing industry,” and should assert itself as a global leader in developing ICO regulations. The ISA is particularly concerned about initial coin offerings being utilized as a vehicle to bypass established financial regulatory apparatus, stating that “some see ICOs as a financial bubble lacking any financial reasoning, and participating in some ICOs as a way to bypass current IPO regulations.”

CEO of 99bitcoins, Ofir Beigel, has spoken in favor of balanced ICO regulations. Beigel described the ICO market as having “become some sort of an OTC stock market which allows everyone to ‘join the party’… While I really think this is a great and innovative way to raise funds, most of the public is still unaware of the huge risks it entails. Government regulation for ICOs, if done properly and without stifling innovation, seems like a good initiative to protect the public.”

Israeli Has Joined the United States, Canada, China, and Singapore in Moving Toward Developing ICO Regulations

Nir Porat of Porat and Co. Law Firm, a company specialized in trading and cryptocurrency law, has “welcome[d] the ISA’s initiative”, emphasizing the risks associated with an unregulated ICO market.

If left to operate without regulation and supervision, negative influences are sure to enter this realm, be they illegitimate coin offerings without sufficient foundation, hacking attacks, or thefts from digital wallets… The Israeli regulator needs to set appropriate monitoring and enforcement guidelines, while at the same time checking that it is creating a fair and balanced regulatory framework. This framework should protect the public but not apply unfair weight upon companies in the market, lest it stifle innovation and profitability.

The establishment of the ISA’s ICO committee comes amidst growing concern from financial regulators worldwide. The United States Securities and Exchange Commission this week warned investors against initial coin offerings, describing ICOs as sometimes being used to “convince potential victims to invest their money in scams.” It has also been revealed that Chinese regulators recently considered suspending all ICOs occurring in China, in addition to a number of measures designed to curb the proliferation of initial coin offerings.