Israel's Diamond Exchange to issue cryptocurrency

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Diamond Exchange managing director Eli Avidar told the Knesset Finance Committee that the currency will be backed by diamond purchases on the market.

The growing trade in bitcoins and cryptocurrency has caught the attention of Israel's Knesset members. The Knesset Finance Committee today discussed arrangements and policy for cryptocurrency use and operations.

Israel Diamond Exchange managing director Eli Avidar surprised those present by announcing, "The Ramat Gan Diamond Exchange is set to issue a digital currency that will be backed by 25% of the diamond purchases on the market and its volatility will be based on a diamond market index. It's about time that the regulator told us what can and can't be done and won't just frighten us."

Bank of Israel deputy governor Nadine Baudot-Trajtenberg had begun discussions by saying that cryptocurrencies should be seen as a financial asset. But she noted that, "The law defines a foreign currency as a bill or tender that is legally recognized abroad but not part of a legislative process in Israel. If so the bitcoin and other cryptocurrencies do not meet the legal definition of a currency or foreign currency. Above and beyond the legal definition, when examining the economic parameters of virtual currencies, they do not fill the main role of a currency. A critical element existing in a currency is the degree of credibility that users give it."

Trajtenberg also said that from the point of view of the risks of the currency, the Bank of Israel looks at cryptocurrencies as having the same risks as transferring cash and so a high risk must be taken into account."

She noted that the Supervisor of Banks has set up an internal committee to examine the subject. Baudot-Trajtenberg added that it would be difficult to draw conclusions from elsewhere in the world because to the best of her knowledge no regulator worldwide had instructed its banking system in how to relate to cryptocurrencies.

Israel Securities Authority (ISA) chairman Shmuel Hauser said that the main issue regarding digital currencies was to give investors the feeling that they are being protected. "I'm not against virtual currencies but we must create an appropriate regulatory framework before we allow companies engaged in cryptocurrencies to trade on the stock exchange."

He added, "There are companies that want to engage in digital currencies and are asking to make an offering on the stock exchange. There was for example Natural Resource that saw its value grow hundreds of percent, and there are more companies like that. The TASE needs a regulatory framework that protects investors. We at the ISA want to find a framework designed for these companies."

Israel Tax Authority head Moshe Asher said, "We have prepared a position paper similar to the ISA and it will be published in the coming few days."

Knesset Finance Committee chairman Moshe Gafni (United Torah Judaism) concluded the debate by saying that a joint committee should be set up by the ISA, TASE, Tax Authority, and the Anti Money Laundering Authority. He said, "The Finance Committee will follow the government's actions and we won't leave it only to the government because not everyone here trusts the government."

Published by Globes [online], Israel business news - www.globes-online.com - on January 8, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

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