An Israel Securities Authority (ISA) committee tasked with examining the regulation of crypto coin offerings has submitted its final recommendations on March 6. They include the option of creating a dedicated platform for trading digital assets.
Regulating Coin Offerings in Israel
The Committee for the Examination and Regulation of the Issuance of Cryptographic Coins was established in August 2017 to consider the applicability of local securities law to initial coin offerings (ICOs). The committee was asked to study and characterize these projects, prepare a comparative review of the law in various countries around the world, and recommend a regulatory policy outline in areas related to the securities law. This was supposed to be done while balancing the encouragement of technological innovation with the obligation to safeguard the interest of the investing public.
In March 2018, the committee published an interim report for public comment, and has since held a series of meetings with industry and academic leaders to clarify the issues that arose. The final report noted that since the publication of the interim report, many changes have taken place in the field. The most significant trend in this context is the significant decline of ICOs compared to early 2018. It explained that raising funds in this field in Western markets is currently carried out mainly by sophisticated investors and by issuing crypto assets included in the definition of Security Token Offerings (STOs) in accordance with relevant regulations.
The final report offers a few main recommendations. The first is applying securities law to the issuance of crypto assets, while adapting the suitability of disclosure requirements to the unique characteristics of the activities of these projects. The second recommendation is the use of a regulatory sandbox framework in order for the ISA to acquire experience in the field and to accompany entrepreneurs in this format.
The committee recommends examining the possibility of making adjustments to the existing regulations in order to create a more suitable regulatory framework for this trading activity in the form of a dedicated platform for the trading of crypto assets, which it believes will best mitigate the risks involved. The regulation of crowdfunding in Israel is offered as a similar model for the ISA to build on.
The committee also recognized the importance of a direct relationship between regulators and industry and has invited projects to contact the ISA, promising to examine their activity in an open manner, in as short a time as possible, and by adopting a flexible interpretation.