Earlier this week, the Israeli crypto exchange became the first crypto firm in the country to receive a license enabling it to work with local banks.
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As a result of attaining the license, Bits of Gold will be able to store digital currencies through secured custody in a “Bits of Gold Wallet” they have been working on for some time. It will also start providing a service that enables banks and other financial institutions to connect to its digital asset services.
In a public statement, Bits of Gold said that the license is the next step in their mission to make the world of digital currencies more accessible to the Isreali public “in a simple and secure manner.”
Authorities in Israel have been putting restrictions on cash payments in the country as it tries to combat illegal activity and drive a transition to digital payments within the country.
Despite that, institutional adoption in the country has been slow with Isreali banks having been very unfriendly towards crypto and blocking services until recently, citing Anti-Money Laundering (AML) issues.
In 2017 the Israeli Supreme court ruled that local bank Leumi was legally allowed to refuse service to Bits of Gold, with the bank claiming that Bitcoin’s nature made it impossible for them to follow ALM requirements.
The Supreme Court’s position had changed by 2019 however, when it ruled that Leumi could not block Bits of Gold’s account based on regulatory concerns, and in doing so set a precedent for other cryptocurrency firms.
The enforcement of new AML regulations by the government in Israel further opened the path to co-operation between banks and the crypto industry. The development also set a requirement that crypto companies must be licensed, although companies that applied for one were given a permit to temporarily continue their operations.
Another barrier to institutional adoption in Israel is its taxation laws. The country was recently ranked as the third worst country for crypto taxation according to a report released by crypto analytics firm Coincub on Sept. 8.
According to Coincub, sales of crypto is generally subject to a capital gains tax of up to 33% in Israel and if the investing activity is deemed to be business related, it is subject to income tax up to 50%.
While the Capital Market, Insurance and Savings Authority had already granted the first Israeli crypto license to infrastructure firm Hybrid Bridge Holdings earlier this month, the license that Bits of Gold received represents the first one given to an active broker.