Israel Securities Authority proposes amendment to redefine “Digital Assets”

• The Israel Securities Authority proposed a framework for the regulation of digital assets.
• The proposal included a change in the definition of securities to cover digital assets used for financial investment.

The Israel Securities Authority (ISA), the top securities regulator of Israel, put forth a proposal to regulate digital assets as an increasing number of Israelis are getting exposed to them. The proposal aimed to balance the risks associated with investing in digital assets with the need for regulation.

Digital Assets redefined as securities

The ISA has established multiple committees over the past several years, which examined and regulated the issuance of cryptocurrencies. Additionally, they promoted the development of digital markets in Israel. The latest committee was tasked with examining the authority’s policy on investment products in digital assets.

This proposal will affect 150 companies that currently operate in the country’s crypto space. It includes an amendment to the definition of securities to include digital assets used for financial investment. 

Furthermore, it defines digital assets as a digital representation of value or rights used for financial investment. In addition, the ISA seeks the power to oversee the digital asset industry, including setting requirements for issuers and intermediaries and imposing sanctions for non-compliance.

More power for the Israel Securities Authority

A key element of this amendment is the requirement that issuers with digital assets need to publish a document outlining the details of the digital asset before it could be issued or registered for trading. 

This is to protect investors by requiring intermediaries in the digital asset industry to comply with rules similar to those applied to intermediaries in the traditional securities industry, such as the requirement to hold a license and meet capital adequacy standards.

The proposal also addressed the risks associated with digital assets, such as the potential for fraud and market manipulation, by granting the ISA the power to intervene in cases of suspected wrongdoing. The proposal is open for public comment until February 12. This will be followed by a six-month waiting period before it goes into effect.