Israel’s regulator is teasing extensive cryptographic frameworks at the ICC

In his monthly crypto-technology column, Israeli series founder Ariel Shapira covers new technologies in the crypto, decentralized finance (DeFi) and blockchain area, as well as their roles in shaping the economy in the 21st century.

Although regulation is always a hot topic for the crypto scene, it is always interesting to take a sneak peek behind the curtains and get a sense of how those who write the rulebook view the situation in the game. At the end of May, Israel’s crypto enthusiasts and entrepreneurs had a chance to do just that when they met for the annual Israel Crypto Conference, which took place on 23-25. May.

One of the panels was none other than Ilan Gildin, chief economist and strategic advisor at the Israel Securities Authority. Gildin joined other prominent panelists, including Maya Zehavi from a stealth-mode venture fund, and Jonathan Shek from Oz Finance, to share his thoughts on Defi’s future prospects. It was there that he revealed that a whole range of Israeli financial authorities had prepared a comprehensive and comprehensive set of rules for digital assets. The document came in the near future, he shared, and the powers that be sought to promote the growth of Israel’s crypto industry in a responsible and compatible manner.

Now any Israeli will tell you that here “near future” can mean anything between a few weeks and a few years, and the latter is more likely. Still, some in the audience were probably curious to hear about the upcoming rulebook, and Ilan’s recognition that some of the crypto’s unique features are really valuable. The crypto winter will show who they are, he said, as the DeFi space also has its fair share of hot air.

He also pointed out some of the most important concerns that regulators may have. When code is allowed, someone has to explain it truthfully to those who do not know it, he shared, also pointing to stack coins as the “glass fence” for the crypto industry – an understandable concern, given Terra’s recent collapse and the response it gave. from the authorities.

We do not need the Israeli authorities to ask us to do code revisions, Maya retorted, emphasizing that the industry took its own steps towards regulation and good practice. This was really the feeling I got from many of the participants. While regulators are striving to make their first move, the industry is already figuring out its own ways and standards, moving in step with the business, not the government. Yet even more came with another prayer: Give us security, no matter what type, the sooner, the better. And they were not mistaken.

Related: DeFi: Who, what and how do you regulate in a borderless, code-controlled world?

Maybe yes, maybe after

The Israeli government has a rather ambivalent relationship with digital assets. A year ago, the country’s central bank, the Bank of Israel (BoI), experimented with a blockchain-based digital shekel based on Ethereum – a private, siled fork, judging by reports at the time. The agency has positive prospects for a digital national currency, as it revealed in May 2021, and considers the prospects to be beneficial for the Israeli economy. Later, in November, Bank of Israel Governor Amir Yaron told Reuters that the body stepped up its research efforts in the digital shekel, and that the country was looking to take the lead in the pressure on the central bank’s digital currencies.

The outlook actually looks quite reasonable. Israel’s blockchain scene is teeming with innovation, so it would only make sense for the country to lead the way in the field: from adding resilience to payment infrastructure to helping the government weed out money in tackling the problem of the shadow economy, as the bank Israel rightly noted in his own report. More importantly, though, it would position the nation at the forefront of the digital economy and attract foreign investment so that the country can serve as the test area for the new financial paradigm.

Related: US central bankers’ digital currency commentators shared benefits, gathered in confusion

According to María Luisa Hayem, El Salvador’s Minister of Economy, who also spoke at the ICC 2022, this is exactly what happened to El Salvador after using Bitcoin as a legal tender. The country had attracted innovative companies who wanted to play with their products with an eye to greater regional expansion, she told the participants and welcomed them to join. Israel could do the same for the greater Middle East, and showcase a new generation of economy powered by a strong and resilient blockchain infrastructure. It may even provide Israel with another common ground for exploring with other forward-looking nations in the region, such as the United Arab Emirates, which is also experimenting with the blockchain, and further promoting regional integration.

Yet the Jewish state is not exactly there at this time, and despite BoI’s overturns to the digital shekel and instructing banks to open up for profits from crypto – a real boon for crypto companies, which used to struggle with their banking business – there is plenty of room for progress. And frankly, a regulatory framework really sounds like a good starting point, since it would give companies a clear system of coordinates to follow when launching and expanding their business.

On top of that, an opportunity to operate as a fully compatible and regulated entity from Israel without having to apply for a license from Gibraltar, Malta or other crypto-friendly jurisdictions will make life more convenient for businesses. After all, the regulated status opens doors, especially if you are serving institutional clients, which the crypto scene is becoming increasingly friendly to.

All in all, Israel, like many other nations, has a lot to gain from opening up to blockchain and crypto assets. So it is no surprise that everyone I spoke to at the ICC looked forward to more government action because security, whatever its form or form, is the ultimate prerequisite for that to happen.

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