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Bitcoin under surveillance: The supervision of virtual currencies also reaches Israel
In the coming weeks, the Anti-Money Laundering Law is expected to pass, which will oblige all entities that provide services in virtual assets to identify those who work in them.
Globes following the new law on the way - what does it mean for Bitcoin players, from what amount will a reporting obligation be required, and what price did Israel pay for the delay?
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Bitcoin
These are Levi-Weinrib
Monday, 25 January 2021, 06:00
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A step in the war against money laundering (Photo: ShutterStock)
The jump in the value of virtual currencies over the past six months is meteoric.
Bitcoin has completed an increase of about 236% since last July, and today stands at more than $ 32,000 per unit.
Etherium, the second currency in terms of volume of activity, jumped 340%.
The fact that trade in virtual currencies has grown to enormous proportions, and on the other hand is conducted almost unsupervised - has led the Anti-Money Laundering Authority to try and revive legislation that has been in place for two years, but has been delayed each time.
"Soon, all platforms that provide services in virtual assets - currency conversions, transfers between accounts in Israel and abroad and other operations - will be required to perform a full identification procedure for each party for a virtual operation performed in excess of NIS 5,000 (or $ 1,000 / euro). Red light "At the service provider, he will have to report it to the Anti-Money Laundering Authority.
He will also be required to report any transaction in a virtual asset, wallet or currency that appears to be "unusual", such as an transaction of exceptional financial volume, financial transfers to enemy countries and more.
All of these obligations are enshrined in a new order that is due to be approved by the Constitution, Law and Justice Committee in the coming month, and which puts under the anti-money laundering regime all currency service providers, including virtual currency service providers.
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Some crypto exchanges are already subject to the restrictions of countries in the field of money laundering?
Yes.
But first it is important to explain how huge this market is - according to data from the CoinMarketCap website, the value of the digital currency market (the global crypto market) is about $ 962 billion, which is rolled out in thousands of trading venues worldwide.
The leading currency since 2009 until today is Bitcoin, but there are many hundreds of additional currencies.
Some of these foreign crypto exchanges are already subject to the rules of customer identification and reporting to anti-money laundering authorities.
This follows the international standard set by the intergovernmental body leading the fight against money laundering and terrorist financing, the FATF, about two and a half years ago.
These rules have long been adopted into the legislation of many countries.
What is happening to us in terms of supervision?
In Israel, the legislative process of the new rules for regulating the crypto market has been delayed for over two years, in part due to the election fever in which the state fell ill.
In any case, the Anti-Money Laundering Authority hopes that in the coming month the legislative process will be completed and the order approved.
Last week there was a first hearing in the sections of the order, and this week the second hearing will take place.
It is estimated that further discussion of the complex order clauses will be required, after which it will be approved.
What exactly is the definition of the new order?
The order replaces the definition of the term "currency services" in the Anti-Money Laundering Law, with a broader definition of "service in a financial asset".
So it includes all the operations and services done in financial assets that do not provide credit.
Among the financial assets that have been added to the definition is "virtual currency", with the intention of enabling the supervision of financial services that are not in tangible assets or by standard financial means.
Consequently, the law will also apply to service providers in intangible assets.
Thus, among other things, service providers in virtual assets must identify all parties to the transaction in the amount of NIS 5,000 or more.
In the event that these transfers raise concerns about illegal activity, the service provider must report them to the Anti-Money Laundering Authority.
Among other things, the list indicated activities that appear to be intended to circumvent the duty to report or identify, the service applicant's refusal to provide identification documents after being asked to do so, an action of high financial scope and complexity, without a reasonable explanation.
The order also includes: actions in the framework of the transfer of virtual currencies for the purpose of online gambling, or the receipt and transfer of virtual currencies originating from the "Dark Market" platforms and more.
One of the main arenas of bitcoin trading - cyber attacks.
In the photo: another guy with a hoodie in a generic illustration for a cyber attack (Photo: ShutterStock)
What is the purpose of the new order?
In recent years, criminal elements have entered the virtual trading arena, abusing the characteristics of digital currencies, both for cybercrime and for money laundering and terrorist financing.
While Bitcoin is still the most common digital currency in these contexts, a FATF study found that no less than 30 other types of digital currency have been linked to criminal activity.
The criminal activity known to the public includes cyber attacks and ransom demands in virtual currencies, but also goes through money transfers to criminal and terrorist financing organizations, and assistance to these organizations through online payments.
The order will allow tighter supervision of the use of these currencies.
It should apply stricter and broader rules than those currently in place to financial asset service providers.
According to Shlomit Wegman-Ratner, head of the Anti-Money Laundering and Terrorist Financing Authority, "The anti-money laundering order will regulate, among other things, the field of virtual assets, which is developing and growing rapidly around the world." By criminal elements and professional money launderers, exploitation that even intensified during the Corona crisis. "
Wegman-Ratner says, "In order to address these risks, the FATF has set global standards unique to the field. These rules have long been assimilated in many countries around the world and the order will also be incorporated into Israeli legislation. This is necessary to ensure Israel does not become a magnet for criminals. in the field".
To the authorities' approach, the financial services providers market is supervised and broad and is of great economic importance.
It can be used as an alternative to the services currently provided by the banking and institutional system.
To whom will the order apply?
If approved, the order will apply to entities in the fintech industry that provide services in financial assets, including the provision of services in virtual assets (crypto), international money transfers, currency conversions, asset retention and more.
Brokers, exchangers and platforms for converting and trading cryptocurrencies in Israel will be required to conduct a process of identifying workers in the virtual arena as well as monitoring and reporting on actions taken, both routinely and as exceptional reports.
What is the position of the bodies to which the order will apply?
The community of virtual service providers believe that the order is necessary, and hope that it will indeed pass in the coming month as it turns out.
According to Manny Rosenfeld, chairman of the Israeli Bitcoin Association, "The Israeli bitcoin industry is caught between the blockades of banks that rely on statements from the previous decade and the need to grow and develop.
We want this industry here, not in London or New York.
"Transferring this order now, even before the election, is critical. We have already lost a significant part of the bitcoin and blockchain industry in Israel, and we are aware that many companies have abandoned Israel because they could not easily receive basic banking services, as we should have. We hope that The order will pass, the rules of what is allowed and what is forbidden will be clear and official, and they will no longer be able to arbitrarily stop the legitimate activities of companies, holders and users of Bitcoin in Israel. "
According to Yuval Roash, CEO of Beats of Gold, “This order is very important, very critical and we have been waiting for it for over two and a half years.
Need regulation.
Bitcoin's way to move forward and take its rightful place in the world, is through the front door and not in the dark.
Bitcoin should be one of the leading currencies in the world, and as such it needs clear rules and orderly supervision.
"Everywhere in the world where a framework of rules has been created for Bitcoin, like any other currency, it has soared, and its activity has soared, and we believe that this order will also help the industry in Israel to develop."
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