Legal or not?

Legal issues over digital currency trading

Legislation is vague, regulatory oversight is changing morning news and digital currency trading is complex and rampant.

Adv. Paz Yitzhaki-Weinberger, who specializes in foreign law and is a member of international law firms, explains the legal issues surrounding electronic currency trading and why caution should be exercised.

Hila Tzur-Shinzi, in collaboration with Zap Legal

05/04/2022

Tuesday, 05 April 2022, 08:18 Updated: 12:46

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"Legislation in the field is very vague, changes very frequently and mainly creates complexities" (Photo: ShutterStock)

Cryptocurrencies allow economic freedom for people from all over the world.

Similar to the Internet revolution - crypto is spreading, freeing from monopolies and the hegemony of banks, streamlining many areas - in particular administrative, and reducing bureaucracy while "breaking boundaries" between countries.

However, trading in crypto and NFT also has drawbacks - he is a magician to negative factors, whether they are tax offenders or drug offenders, terrorists and money launderers.

It also creates an opening for many scams, which expose investors to risks due to the lack of a government defense and security network and sometimes even the loss of access to funds.

Adv. Paz Yitzhaki-Weinberger, who specializes in foreign law and is a member of international law firms, expands on the legal issues surrounding e-currency trading:

"There is a lot of legislation and regulation dealing with the banking world - tax law, definitions and differences between asset types, transaction types, value added tax, appreciation tax, income tax, dividend tax, withholding tax deductions and so on. Nevertheless, in crypto law, if you can read For them in a comprehensive name, there is still no orderly legislation, the field has broken out and many gaps are revealed when the legislature and the installer of regulations have to keep up with the pace of technological progress. "

According to Adv. Yitzhaki-Weinberger, "Legislation on the subject is done at a different pace and in different configurations that vary from country to country, because crypto is a virtual and international domain and not an official currency controlled by one country or another.

" States will of course be subject to local legislation and more than once to the legislation of countries where their customers or suppliers are located.

"Some countries ban the use of crypto or certain currencies and some countries impose a reporting obligation."

In addition, "Traditional banks often find it difficult to accept money that originates in crypto, because there is a very justified concern about the source from which the funds came - which may not be money from crime, drug trafficking, trafficking in women, terrorism, including sanctions enforcement, bans Money laundering and a ban on the use of unreported funds, for which no taxes have been paid and more. "

"Everyone is familiar with bitcoin and the cryptocurrencies that are traded on stock exchanges, with new currencies being created every day that can originate from even state banks, commercial companies, football clubs, individuals and more. "Coin mines and those that have a limited and absolute number of units, and there are crypto applications, such as the NFT, that constitute a unique and unique representation of a tangible product in a digital form, for example a work of art," explains Adv. Yitzhaki-Weinberger.

"The NFT is the equivalent of the 'original' and can be traded. However, the banks and the legislative system have not yet properly regulated the NFT trade which in the meantime is only waking up and increasing. People are even buying virtual land in the NFT, virtual figures. There are profits. "It is huge for activists in the field and it is still unclear how they will be dissolved, at what rate and at what time."

Adv. Yitzhaki-Weinberger notes that as of today, there are no clear answers and this may raise problems regarding the ability to realize the profits from these virtual transactions in the real world.

raising And worldwide directly and without any administrative regulations and restrictions involved in the issuance process of a traditional company.

That is, without the need for significant financial infrastructure, controls, regulatory approvals, accounting services, lawyers and "orderly financial statements or prospectuses," notes Yitzhaki-Weinberger.

That is, in the crypto world anyone can still "tell a story" and raise money from tens and even hundreds of millions of people, which puts the legislature helpless and in its need to protect investor money and carry out regulation and regulation of this important and evolving field.

"On the one hand," explains Weinberger-Yitzhaki, the NFT route and raising capital in digital currencies is good for entrepreneurs who set up legitimate businesses and want to raise money quickly and bypass barriers, because they do not have to put a prospectus as required by the stock exchange. In a kind of security) without any preoccupation with 'administrations'.

They can also operate anywhere in the world without the need to set up local companies, open bank accounts and need accounting control and submit reports in a variety of territories.

However, as noted above, "legislation in this area is very vague, changes very frequently and mainly creates complexities in conflict between different laws and between different countries."

How is the complexity of legislation around global currencies reflected?

"The world of crypto is evolving at a dizzying pace. What was true a decade ago is very different from what it was a year ago and even a month ago," emphasizes Adv. Yitzhaki-Weinberger. 'Currency' and there is a difference between one cryptocurrency and another, with each relevant regulatory body - for example the Securities Authority, the Supervisor of Banks, the Supervisor of the Capital Market and the Ministry of Finance - pulling in a different direction and demanding different requirements.

The lack of uniformity within each and every country is increasing and becoming more complex between the countries and this makes it difficult to follow and monitor the issue, especially when the changes are frequent and sometimes daily. "

According to him, "the same process takes place, as stated, both within other countries and where one authority or another 'pulls the blanket' in its direction and wants one regulation or another, and often the company that issues the currency or works with the currency, to adapt its activities to many countries. "Depending on the identity of its customers and making sure that it did not commit an offense, this is because what could be kosher in Israel could be perceived as a serious offense in China and even slip into the criminal realm."

"Digital currencies and digital assets, particularly the NFT, are global products without a uniform global law, so anyone who wants to provide services in this area is required to comply with strict local laws and sometimes bear many consequences arising from their actions and actions."

These consequences, explains Adv. Yitzhaki-Weinberger, continue even for those who choose to invest in NFT or digital currencies that are required for reporting and taxation.

"At the end of the process or chain," he describes, "they encounter practical difficulties in transferring virtual money to the banking system, which often rejects them, so they may end up owning many millions in digital currency and being rich as 'on paper', but in practice they can not realize "In the real world, that is, they can not buy property and the money remains virtual in the full sense of the word."

"Today you can get legal advice on digital currencies and digital assets, including NFT, both for those who want to invest in the field and only buy or trade in these currencies (quite a few of which are also very volatile) and for companies interested in raising funds through issues or licensing in this new and evolving field." .

Advocate Yitzhaki-Weinberger recommends: "Make sure your lawyer is not only proficient in international law but also proficient in the cyber and high-tech worlds, because activity in these currencies has technological implications, including in the areas of information security and privacy.

"As someone who has been in the field for several years, accompanies and establishes international businesses and deals with the protection of intellectual property, I can testify that many countries share characteristics that touch on each other in terms of legislation, so the advice is tailored to each client and his activities.

" Paz Yitzhaki-Weinberger, a high-tech entrepreneur and owner of a law firm specializing in foreign law, high-tech law and capital raising, international investment support and private international law, litigation, insolvency, civil and commercial law, dispute resolution and disputes and a variety of cross-border issues.

His firm was selected as one of the 200 leading law firms in the world by Legals Finest.

Adv. Yitzhaki-Weinberger has a very significant background in the high-tech worlds, both as a technology expert and as a partner in exits worth hundreds of millions of shekels. He is well versed in the world of digital currencies and NFT

Appointed

as the Chief Technologist of one of the centers of the Elite Intelligence Unit of the Intelligence Corps

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• Crypto

• Bitcoin

• Digital currencies